Credit Period Length in each of the following pairings, indicate which firm would probably have a longer
Question:
Credit Period Length in each of the following pairings, indicate which firm would probably have a longer credit period and explain your reasoning.
a. Firm A sells a miracle cure for baldness: Firm B sells toupees.
b. Firm A specializes in products for landlords; Firm B specializes in products for renters.
c. Firm A sells to customers with an inventory turnover of 10 times; Firm B sells to customers with an inventory turnover of 20 times.
d. Firm A sells fresh fruit; Firm B sells canned fruit.
e. Firm A sells and installs carpeting; Firm B sells rugs.
Step by Step Answer:
a B A is likely to sell for cash only unless the product rea...View the full answer
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th Edition
Authors: Stephen A. Ross, Randolph W. Westerfield, Bradford D.Jordan
Related Video
Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.
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