Which company is most likely to have a higher inventory turnover than its competitors within the same industry?
A)A company with lower-priced goods and lower gross profit.
B)A company with higher-priced goods and lower gross profit.
C)A company with higher-priced goods and higher gross profit.
D)A company that reports lower cost of goods sold and higher inventory values.

Question

Quizplus · Accepted Answer

Inventory turnover can vary significantly between companies within the same industry,particularly if they take different approaches to pricing their inventories.
Walmart follows a low-cost pricing policy,which means setting its sales prices only slightly above cost.This policy led Walmart to earn about 24.3 cents of gross profit on each dollar of sales,whereas Macy's earned 40.1 cents of gross profit.But when you consider the inventory turnover measures,you can see the full implications of this pricing policy.Walmart turns its inventory over about 8.1 times a year (45 days),whereas Macy's turns inventory over 3.1 times a year (118 days).Often,the company with a lower gross profit percentage has a faster inventory turnover.

Which Company Is Most Likely to Have a Higher Inventory