Since inventory is a signiﬁcant current asset for most retail organizations, the inventory turnover ratio would be of signiﬁcance to investors and analysts in terms of assessing liquidity.

Question

Quizplus · Accepted Answer

This is true because inventory turnover ratio measures how quickly a company can sell its inventory and convert it into cash. A high inventory turnover ratio implies that the company is efficiently managing its inventory, which indicates good liquidity. Conversely, a low ratio suggests that the company may be facing inventory management issues, which can adversely affect its liquidity. Investors and analysts often use this ratio to assess a company's ability to generate cash flow and meet its short-term obligations.

Since Inventory Is a Signiﬁcant Current Asset for Most Retail