Smith Company has a low number of days in inventory.This indicates that:
A)their inventory sales are producing low profits.
B)their inventory is turning over rapidly.
C)the cost of inventory is very high.
D)the firm has a low Gross profit percentage.

Question

Quizplus · Accepted Answer

A low number of days in inventory indicates that the company is able to turn over its inventory quickly, which is a positive sign, as it reduces the risk of obsolete inventory and frees up cash flow for other uses. It does not necessarily indicate low profits or high costs, and is not directly related to the Gross profit percentage.

Smith Company Has a Low Number of Days in Inventory