A decline in a firm's inventory turnover ratio suggests that it is managing its inventory more efficiently and also that its liquidity position is improving, i.e., it is becoming more liquid.

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A decline in inventory turnover ratio indicates that a company is selling less inventory, which means it has excess inventory on hand. This can lead to increased storage and holding costs, tying up capital and reducing liquidity. Therefore, a decline in the inventory turnover ratio generally suggests lower efficiency and lower liquidity.

A Decline in a Firm's Inventory Turnover Ratio Suggests That