Suppose that a logistics manager is able to eliminate some unnecessary inventory,which reduces the value of current assets as well as total asset value.What is the corresponding impact on inventory turnover and return on assets (ROA)?

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Quizplus · Accepted Answer

Reducing unnecessary inventory decreases the average inventory value, which increases inventory turnover (since inventory turnover is calculated as cost of goods sold divided by average inventory). Additionally, reducing inventory improves asset efficiency, potentially increasing ROA (since ROA is net income divided by total assets, and reducing unnecessary assets can improve net income through reduced carrying costs).

Suppose That a Logistics Manager Is Able to Eliminate Some