The _____ ratio may indicate the firm is experiencing stock outs and lost sales.

Average payment period

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Inventory turnover

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Average collection period

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Solution

The correct option is C Average payment period
The average payment period (APP) is defined as the number of days a company takes to pay off credit purchases. It is calculated as accounts payable/ (total annual purchases/360). As the average payment period increases, cash should increases as well, but working capital remains the same. APP ratio may indicate the firm is experiencing stock outs and lost sales.

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The ___________ may indicate that the firm is experiencing stock-outs and lost sales.

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