Which of the following statements is not correct regarding the importance of inventory turnover to a company's profitability?
A)Companies will prefer to have a low inventory turnover rather than a high inventory turnover.
B)It is sometimes more desirable to sell a large amount of merchandise with a small amount of gross margin than a small amount of merchandise with a large amount of gross margin.
C)A company's profitability is affected by how rapidly inventory sells.
D)A company's profitability is affected by the spread between cost and selling price.

Question

Quizplus · Accepted Answer

Overall profitability depends upon two elements: gross margin and inventory turnover.The most profitable combination would be to carry high margin inventory that turns over rapidly (meaning a high inventory turnover).To be competitive,however,companies must often concentrate on one or the other of the elements.Different companies use different business strategies to achieve their objectives.

Which of the Following Statements Is Not Correct Regarding the Importance