A rising balance in the inventory account and a falling inventory turnover ratio implies that the inventory build up is occurring because:
A) goods are not selling as fast as they were in the past.
B) the company is expecting to sell more in the future.
C) goods are selling, but it is taking longer to collect payment.
D) goods cannot be shipped fast enough.

Question

Quizplus · Accepted Answer

A rising balance in the inventory account indicates that the company is holding more inventory than it did in the past. A falling inventory turnover ratio indicates that the company is selling its inventory at a slower rate than it used to. This suggests that goods are not selling as fast as they were in the past, resulting in inventory build up.

A Rising Balance in the Inventory Account and a Falling