Which of the following would cause the greatest increase in a company's inventory turnover ratio?
A)Keeping the same amount of inventory on hand while unit sales are increasing.
B)Increasing the amount of inventory on hand while unit sales are increasing.
C)Keeping the same amount of inventory on hand while unit sales are decreasing.
D)Decreasing the amount of inventory on hand while unit sales are increasing.

Question

Quizplus · Accepted Answer

The inventory turnover ratio is calculated by dividing cost of goods sold by average inventory.Generally,an increase in sales would cause an increase in cost of goods sold.If the numerator increases (as a result of increased sales)and the denominator decreases (as a result of a decrease in the amount of inventory on hand),the turnover ratio would increase by the greatest amount.

Which of the Following Would Cause the Greatest Increase in a Company's