Tammy is a production manager at Eagle's Nest, Inc.. She is concerned that too much money is being wasted on inventory that is sitting in the warehouse too long. She should calculate a(n):
A) current ratio.
B) inventory turnover ratio.
C) conversion ratio.
D) profitability ratio.
E) leverage ratio.

Question

Quizplus · Accepted Answer

The inventory turnover ratio measures how many times a company sells and replaces inventory during a specific period. If Tammy is concerned about inventory sitting in the warehouse for too long, an inventory turnover ratio calculation will give her an idea of how efficiently the company is selling and replacing inventory. A higher inventory turnover ratio indicates that the company is selling inventory more quickly and efficiently, while a lower ratio suggests that the company may be holding too much inventory or not selling it effectively.

Tammy Is a Production Manager at Eagle's Nest, Inc