Question

Which of the ratio will be useful to confirm credit
sales?
Creditors turnover ratio
Fixed Assets turnover ratio
Debtors turnover ratio
Stock turnover ratio​

Answer 1

Answer:

I think (B) The numerator of the formula has EBIT. ...

The denominator is the total interest expense of the firm, which is a burden for the firm, and when EBIT is divided by total interest expenses, it can be interpreted as how many times the firm is earning to cover its interest obligation.

Answer 2

Fixed Assets turnover ratio will be useful to confirm credit sales.

Explanation for the answer:

• The fixed asset turnover ratio shows how efficient a company is at generating sales from its existing fixed assets.
• A higher ratio indicates that management is using its fixed assets more effectively.
• But a high FAT ratio does not say anything about a company's ability to produce solid profits or cash flows.
• It is also useful in confirm credit sales.
• Hence, the correct answer among all the options is option Fixed Assets turnover ratio.

(#SPJ3)