Which of the following would cause the greatest increase in a company's inventory turnover ratio? Multiple...
Which of the following would cause the greatest increase in a company's inventory turnover ratio?
Multiple Choice
-
Decreasing the amount of inventory on hand while unit sales are increasing.
-
Keeping the same amount of inventory on hand while unit sales are decreasing.
-
Keeping the same amount of inventory on hand while unit sales are increasing.
-
Increasing the amount of inventory on hand while unit sales are increasing.
Homework Answers
Option A
Inventory Turnover = Cost of Goods Sold / Average inventory
When unit sales increase, Numerator increases
And when inventory decreases , Denominator Decreases
And hence the overall ratio increases
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