An inventory turnover ratio of 7.2 compared to an industry average of 5.1 is likely to indicate that
A) the firm has higher sales than the industry average.
B) the firm is selling a product mix that includes more high margin items.
C) the firm is managing its inventory inefficiently.
D) the firm's products are in inventory for fewer days before they are sold than is average for the industry.

Question

Quizplus · Accepted Answer

An inventory turnover ratio of 7.2 indicates that the firm is selling its products faster than the industry average, which means that products are in inventory for fewer days before they are sold. This can be attributed to efficient inventory management and/or high demand for the firm's products. Therefore, option D is the correct answer. Options A and B may or may not be true, while option C is unlikely to be true given the high turnover ratio.

An Inventory Turnover Ratio of 7