Which of the statements below is TRUE?
A)Inventory turnover is cost of goods sold divided by accounts receivables.
B)Receivables turnover is accounts receivable divided by sales.
C)Total asset turnover is profits divided by total assets.
D)A higher inventory turnover ratio signifies that inventory is moving faster.

Question

Quizplus · Accepted Answer

A higher inventory turnover ratio means that inventory is selling faster, which is indicative of good management of inventory levels. Option A is incorrect because inventory turnover is cost of goods sold divided by average inventory. Option B is incorrect because receivables turnover is sales divided by average accounts receivable. Option C is incorrect because total asset turnover is sales divided by total assets.

Which of the Statements Below Is TRUE