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A companys inventory turnover in days is 80 days. Which of the following actions could help to

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A company’s inventory turnover in days is 80 days. Which of the following actions could help to improve that ratio?
  a.  Increase in sales price
  b.  Increase in manufacturing costs
  c.  Reduction in cost of goods sold
  d.  Reduction in average inventory
  e.  All of the above

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The correct answer is d Reduction in average inventory One of the key ratios that managers use to as...View the full answer


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Cornerstones of Managerial Accounting

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ISBN: 978-0324660135

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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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