Which of the following statements is not correct in regard to the importance of inventory turnover to a company's profitability?
A)Most companies prefer to have a low inventory turnover 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

The statement "Most companies prefer to have a low inventory turnover than a high inventory turnover" is not correct. Generally, companies prefer to have a higher inventory turnover as it indicates that the company is efficiently selling its merchandise and not tying up too much capital in inventory. A low inventory turnover can be a sign of sluggish sales or overstocking, which can negatively impact profitability. The other statements are all correct in regard to the importance of inventory turnover to a company's profitability.

Which of the Following Statements Is Not Correct in Regard