Which of the following statements about inventory turnover is most appropriate?
A) Companies generally strive to have the highest possible inventory turnover ratio.
B) A high ratio indicates the company is having trouble selling its inventory.
C) The most profitable turnover ratio may not necessarily be the highest.
D) A low ratio generally means the company is not keeping enough inventory on hand.

Question

Quizplus · Accepted Answer

While a higher inventory turnover ratio is generally seen as positive, it is not always the most profitable. For example, a company may have a higher profit margin on slower selling, higher-priced products. In addition, a very high turnover ratio may indicate that the company is not keeping enough inventory on hand and regularly experiencing stockouts, which can lead to lost sales and dissatisfied customers.

Which of the Following Statements About Inventory Turnover Is Most