When a firm improves (lowers) its days in inventories it generally:
A) Requires additional cash investment in inventory
B) Releases cash locked up in inventory
C) Does not alter its cash position
D) A firm cannot reduce its inventories

Question

Quizplus · Accepted Answer

Lowering the days in inventories means that the firm is able to sell off its inventory quickly, which releases the cash that was locked up in it. This improves the firm's cash position without requiring any additional investment in inventory.

When a Firm Improves (Lowers) Its Days in Inventories It