In comparison to industry averages,Okra Corp.has a low inventory turnover,a high current ratio,and an average quick ratio.Which of the following would be the most reasonable inference about Okra Corp.?
A) Its current liabilities are too low.
B) Its cost of goods sold is too low.
C) Its cash and securities balance is too low.
D) Its inventory level is too high.

Question

Quizplus · Accepted Answer

A low inventory turnover indicates that the company is not selling its inventory fast enough, which could indicate that its inventory level is too high. A high current ratio indicates that the company has a lot of current assets relative to its current liabilities, which could be due to a high inventory level or a low level of current liabilities. An average quick ratio suggests that the company has a moderate level of liquid assets to cover its current liabilities. Neither A, B, nor C are supported by the information given.

In Comparison to Industry Averages,Okra Corp