Which of the following indicates a positive trend for inventory management? A. Increasing number of days sales
Question:
Which of the following indicates a positive trend for inventory management?
A. Increasing number of days’ sales in inventory ratio
B. Increasing inventory turnover ratio
C. Increasing cost of goods sold
D. Increasing sales revenue
Step by Step Answer:
Inventory turnover ratio identifies the number of times the inventory is used in a particular period ...View the full answer
Principles Of Accounting Volume 1 Financial Accounting
ISBN: 9781593995942
1st Edition
Authors: Mitchell Franklin, Patty Graybeal, Dixon Cooper, OpenStax
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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