If a company decreases their inventory turnover ratio from last year to the current year,which of the following could cause that change?
A)Reduction of inventory levels through implementation of Just-in-Time.
B)Speedier production processes.
C)Increase in inventory levels through change in product mix.
D)Increasing sales at a faster rate than the growth in inventory while maintaining a constant gross profit percentage.

Question

Quizplus · Accepted Answer

If a company increases their inventory levels through a change in product mix, it could cause their inventory turnover ratio to decrease as there is a larger stock of inventory to sell through. This is in contrast to options A and B which would likely increase the inventory turnover ratio by reducing inventory levels or speeding up production processes, respectively. Option D could potentially maintain the inventory turnover ratio if sales and inventory both increase at a proportional rate.

If a Company Decreases Their Inventory Turnover Ratio from Last