Other things remaining the same, if the average aggregate inventory value goes down, then
A) inventory turnover ratio and weeks of supply will both go down.
B) inventory turnover ratio will go down, but the weeks of supply will stay the same.
C) inventory turnover ratio and weeks of supply will both go up.
D) inventory turnover ratio will go up, but weeks of supply will go down.
E) inventory turnover ratiowill stay the same, but weeks of supply will go down.

Question

Quizplus · Accepted Answer

If the average aggregate inventory value goes down, it means that either the inventory level has decreased or the cost of inventory has decreased. In either case, if the inventory turnover ratio (i.e., the number of times inventory is sold and replaced in a given period) goes up, it indicates that inventory is being sold and replenished more quickly, which is a positive sign. At the same time, if the inventory value has decreased, it means that weeks of supply (i.e., the number of weeks of sales that can be supported by the inventory on hand) will go down because there is less inventory to support sales. Therefore, the correct answer is D.

Other Things Remaining the Same, If the Average Aggregate Inventory