A comparison of the current year's inventory turnover ratio with previous years' may indicate the presence of obsolete inventory.

Question

Quizplus · Accepted Answer

If the inventory turnover ratio has decreased significantly compared to previous years, it could indicate that inventory is not selling well, which may be due to it being obsolete or outdated. A high inventory turnover ratio indicates that inventory is selling quickly, which is a positive sign. Therefore, a comparison of the current year's inventory turnover ratio with previous years can help identify the presence of obsolete inventory.

A Comparison of the Current Year's Inventory Turnover Ratio with Previous