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 ratio 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 the inventory turnover ratio (calculated as cost of goods sold divided by average inventory) will go up. This is because the cost of goods sold remains the same while the average inventory decreases, leading to a higher turnover. At the same time, the weeks of supply (calculated as average inventory divided by average weekly sales) will also decrease, as there is less inventory to cover weekly sales. Therefore, the correct answer is D.

Other Things Remaining the Same, If the Average Aggregate Inventory