A high rate of inventory turnover indicates which of the following?
A) The company is losing inventory to shrinkage.
B) The company is making high net income.
C) The company is experiencing a rapid decline in inventory levels.
D) The company sells its inventory rapidly.

Question

Quizplus · Accepted Answer

A high rate of inventory turnover means that the company sells its inventory rapidly, indicating strong sales and a healthy business. A low inventory turnover rate can indicate the opposite, such as slow sales or excess inventory. Option A is incorrect because shrinkage refers to theft or loss of inventory and is not related to the turnover rate. Option B is incorrect because the turnover rate does not necessarily indicate net income. Option C is also incorrect because a high inventory turnover rate does not imply that the company is experiencing a rapid decline in inventory levels.

A High Rate of Inventory Turnover Indicates Which of the Following