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Rainsoft Company Selected Data from the Financial Statements Are Provided

Question 68

Multiple Choice

Rainsoft Company Selected data from the financial statements are provided below:
201520142013 Cash $44,000$28,000$14,000 AccountsReceivable 84,00032,000114,400 Inventory 44,000166,000100,000Prepaid Expenses 46,00036,00041.600 Total Curent Assets $218,000$262,000$270,000 Total Current Liabilities $130,000$144,000 Net Credit Sales 442,000652,000 Cost of Goods Sold 336,000598,000 Net Cash Flows from Operating Activities 32,00058,000\begin{array}{llc}& \underline { 2015 }& \underline { 2014 }& \underline {2013 }\\ \text { Cash } &\$ 44,000 & \$ 28,000 & \$ 14,000 \\ \text { AccountsReceivable } &84,000 & 32,000 & 114,400 \\ \text { Inventory } &44,000 & 166,000 & 100,000 \\ \text {Prepaid Expenses } &\underline {46,000} & \underline {36,000} & \underline {41.600}\\ \text { Total Curent Assets } &\$ 218,000 & \$ 262,000 & \$ 270,000\\\\ \text { Total Current Liabilities } &\$ 130,000 & \$ 144,000 \\ \text { Net Credit Sales } &442,000 & 652,000 \\ \text { Cost of Goods Sold } &336,000 & 598,000 \\ \text { Net Cash Flows from Operating Activities } &32,000 & 58,000\end{array}
-Refer to Rainsoft Company.Assume that competitors in the industry have an average inventory turnover ratio of 20.8 times in 2015.Rainsoft's inventory turnover ratio for 2015 indicates that the company


A) has too little inventory on hand at the end of 2015.
B) is pricing its products too low.
C) is selling its inventory much more quickly than the industry average.
D) may have obsolete inventory or problems with sales.

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