When inventory decreases with no change in throughput or operating expenses, then:
A) profit will increase and return on investment and cash flow will decrease.
B) profit, return on investment and cash flow will increase.
C) profit and cash flow will increase and return on investment will decrease.
D) profit, return on investment and cash flow will decrease.

Question

Quizplus · Accepted Answer

When inventory decreases with no change in throughput or operating expenses, it means the company is selling more of its existing inventory without incurring additional costs, leading to an increase in profit. Since the investment in inventory is reduced while maintaining sales, both the return on investment (ROI) and cash flow will increase. The reduction in inventory effectively frees up cash that was tied up, thus improving cash flow.

When Inventory Decreases with No Change in Throughput or Operating