At a local convenience store, an increase in the inventory turnover ratio would indicate that it is:
A) at risk of holding too much inventory.
B) selling out its merchandise quickly.
C) relying heavily on credit sales.
D) more likely to face a cash flow problem.

Question

Quizplus · Accepted Answer

An increase in the inventory turnover ratio means that the store is selling out its merchandise quickly, which is a positive sign. It indicates that the store is efficiently managing its inventory and not letting it sit idle for too long, which could result in holding too much inventory (option A). A high inventory turnover ratio also means that the store is generating revenue and profits from its sales, which reduces the likelihood of facing a cash flow problem (option D). The ratio does not necessarily indicate whether the store is relying on credit sales (option C).

At a Local Convenience Store, an Increase in the Inventory