Assuming that the quantities of inventory on hand during the current year were sufficient to meet all demands for sales, a decrease in the inventory turnover for the current year when compared with the turnover for the preceding year indicates an improvement in the management of inventory.

Question

Quizplus · Accepted Answer

A decrease in inventory turnover indicates that the company is holding onto inventory for a longer period of time, which ties up cash flow and can lead to increased costs (such as storage fees, obsolescence, and theft). Thus, a decrease in inventory turnover usually indicates poor inventory management, not an improvement.

Assuming That the Quantities of Inventory on Hand During the Current