Question

The larger the inventory turnover, the ________?

1) higher the sales
2) lower the sales
3) no effect on sales
4) cannot be determined

Answer 1

A higher inventory turnover often indicates higher sales, suggesting efficient inventory management and swift restocking, but doesn't solely determine sales levels.

Step-by-step explanation:

The inventory turnover ratio measures how often a company sells and replaces its stock of goods within a certain period. A higher inventory turnover typically indicates that a company is selling goods relatively quickly and suggests higher sales. It implies efficient management of inventory because less money is tied up in inventory for long periods. However, it's important to note that while a higher inventory turnover rate can indicate higher sales, it could also result from lower inventory levels, so it doesn't exclusively determine sales levels.