28. [Extra Credit] A firm\'s Inventory Turnover has the following trend: Year1 Y

Question

28.

[Extra Credit] A firm's Inventory Turnover has the following trend:

Year1 Year2 Year3  
2.4      4.9     10.7

Based on the information given, which of the following could be true?

A. The product may be priced too low.

B. The firm may not be giving any customers credit.

C. The firm may not be holding enough inventory [stock outs].

D. Both A. and C.

A. The product may be priced too low.

B. The firm may not be giving any customers credit.

C. The firm may not be holding enough inventory [stock outs].

D. Both A. and C.

Explanation / Answer

The formulae for inventory turnover = Sales/Inventory

hence, if inventory turnover is high it essentially means that either the sales are very high (in terms of value) or the inventory is very low

hence answer D is correct (the product may be priced too low leading to high sales volume and the firm may not be holding enough inventory)

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.