If a firm's inventory turnover increases, its days' sales in inventory will:
A) Increase
B) Decrease
C) Be unaffected
D) Change, but the direction of the effect can't be predicted
E) None of the above

Question

Quizplus · Accepted Answer

An increase in inventory turnover indicates that a company is selling its inventory more quickly. Consequently, the days' sales in inventory, which measures the average number of days the company holds inventory before selling it, will decrease.

If a Firm's Inventory Turnover Increases, Its Days' Sales in Inventory