When Tri-C Corp.compares its ratios to industry averages, it has a higher current ratio, an average quick ratio, and a lower inventory turnover.What might you assume about Tri-C?

Question

Quizplus · Accepted Answer

A higher current ratio indicates that Tri-C has a higher level of current assets relative to its current liabilities, which could suggest a strong cash balance. An average quick ratio indicates that Tri-C's level of liquid assets may be typical for its industry. However, a lower inventory turnover suggests that Tri-C may be holding onto inventory for too long or may have too much inventory on hand, leading to lower sales and potentially higher storage costs. Therefore, the best choice is D, its average inventory is too high.