Which of the following statements is CORRECT?
A) A reduction in inventories held would have no effect on the current
Ratio.
B) An increase in inventories would have no effect on the current
Ratio.
C) If a firm increases its sales while holding its inventories constant, then, other things held constant, its inventory turnover
Ratio will increase.
D) A reduction in the inventory turnover ratio will generally lead to
An increase in the ROE.
E) If a firm increases its sales while holding its inventories constant, then, other things held constant, its inventory turnover ratio will decrease.

Question

Quizplus · Accepted Answer

The inventory turnover ratio is calculated as sales divided by average inventory, so if a firm increases its sales while holding its inventories constant, the inventory turnover ratio will increase.

Which of the Following Statements Is CORRECT