The higher a firm's inventory turnover,the:
A)longer it takes the firm to sell its inventory and collect payment.
B)faster the firm collects payment on its sales.
C)faster the firm sells its inventory.
D)longer inventory sits on the firm's shelves.
E)greater the amount of inventory held by the firm.

Question

Quizplus · Accepted Answer

A higher inventory turnover indicates that the firm is selling its inventory at a faster rate, which means that the inventory is not sitting on the shelves for a long time. This ultimately results in faster collections and cash flow for the firm. Option A and D are contradictory and Option E is also incorrect as a higher inventory turnover generally means that the firm is holding less inventory.

The Higher a Firm's Inventory Turnover,the