Question

Last year, Cool Lope, Inc. had an inventory turnover rate of 6.8. This year, the turnover rate is 7.1. Based on this information, you know the:

a. Firm’s inventory level is higher this year than it was last year.


b. Firm’s sales decreased from last year to this year.


c. Days’ sales in inventory decreased from last year to this year.


d. Average time it takes to sell inventory has increased.

Answer 1

The answer is D.

Step-by-step explanation:

Inventory turnover is a measure of the number of times inventory is sold in a given period of time period such as in a quarter or in a year.

The formula is Cost of goods sold ÷ the average inventory.

Higher inventory is better than lower inventory because the higher the inventory turnover, the better a business is selling goods(inventories) very quickly and that demand for their product exists. While low inventory turnover depicts weaker sales and declining demand for a company's products