The Corner Hardware has succeeded in increasing the amount of goods it sells while holding the amount of inventory on hand at a constant level. Assume that both the cost per unit and the selling price per unit also remained constant. This accomplishment will be reflected in the firm's financial ratios in which one of the following ways?
A) Decrease in the inventory turnover rate
B) Decrease in the net working capital turnover rate
C) Increase in the fixed asset turnover rate
D) Decrease in the day's sales in inventory
E) Decrease in the total asset turnover rate

Question

Quizplus · Accepted Answer

If the amount of goods sold has increased while holding inventory at a constant level, this means that the inventory turnover rate has increased. A decrease in the day's sales in inventory ratio indicates that the firm is selling its inventory faster, which is a positive sign. The other choices would not reflect the described accomplishment.

The Corner Hardware Has Succeeded in Increasing the Amount of Goods