A high inventory turnover ratio is bad because it indicates the firm has too much inventory.

Question

Quizplus · Accepted Answer

A high inventory turnover ratio actually indicates that the company is selling its inventory quickly, which is a good thing. This means that the company does not have excess inventory sitting around, which can tie up resources and increase storage costs. A low inventory turnover ratio would indicate that the company is selling its inventory slowly or not at all, which is generally a bad thing as it can lead to cash flow problems and outdated inventory.

A High Inventory Turnover Ratio Is Bad Because It Indicates