An increase in the inventory turnover ratio is normally considered to be favourable but could be unfavourable if it means:

Question

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If the inventory turnover ratio increases because the firm is not carrying enough inventory to meet its customer's needs, it may result in stockouts and lost sales, potentially harming the firm's reputation and customer loyalty. Therefore, in this scenario, an increase in the inventory turnover ratio would be unfavourable.

An Increase in the Inventory Turnover Ratio Is Normally Considered