The ability of a company to sell inventory is measured by which of the following ratios?
A)Acid-test ratio
B)Inventory turnover ratio
C)Current ratio
D)Day's sales in receivables

Question

Quizplus · Accepted Answer

The inventory turnover ratio measures how many times a company's inventory is sold and replaced over a given time period. A high inventory turnover ratio indicates that the company is selling its inventory quickly and efficiently. Therefore, it is the best ratio to measure a company's ability to sell inventory. The acid-test ratio measures a company's ability to meet short-term obligations with its most liquid assets. The current ratio measures a company's ability to meet short-term obligations with its current assets. The day's sales in receivables ratio measures how long it takes a company to collect payment from its customers. While all of these ratios are important, they do not directly measure a company's ability to sell inventory.

The Ability of a Company to Sell Inventory Is Measured