Jarrett Companys inventory turnover ratio was nine times in 20X1 and eight times in 20X2. Did Jarrett
Question:
Jarrett Company’s inventory turnover ratio was nine times in 20X1 and eight times in 20X2. Did Jarrett Company sell its inventory more quickly, or more slowly, in 20X2 compared to 20X1?
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Jarrett Company sold its inventory more slowly in 20X2 compared to 20X1 Expl...View the full answer
College Accounting A Contemporary Approach
ISBN: 9781260780352
5th Edition
Authors: David Haddock, John Price, Michael Farina
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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