When a firm improves (lowers)its days of inventory, it generally
A)requires additional cash investment in inventory.
B)releases cash locked up in inventory.
C)does not alter its cash position.
D)cannot reduce its inventories.

Question

Quizplus · Accepted Answer

When a firm improves (lowers) its days of inventory, it usually means that it has reduced the amount of inventory it holds. This translates to releasing cash locked up in inventory, as the firm may have been tying up a significant amount of cash in excess inventory. Therefore, the best choice is B.

When a Firm Improves (Lowers)its Days of Inventory, It Generally