Pinecrest Company Use the selected data from Pinecrest Company's financial statements to answer the following question.
Refer to the data for Pinecrest Company.
Competitors in Pinecrest Company's industry have an average inventory turnover of 20.8 times.Its inventory turnover for 2014
A)indicates that the company has too little inventory on hand at the end of 2014.
B)indicates that the company is pricing its products too low.
C)is equal to the number of days' sales in the company's inventory.
D)indicates that the company may have a large amount of obsolete inventory or problems in the sales department.

Question

Pinecrest Company Use the selected data from Pinecrest Company's financial statements to answer the following question.
 Refer to the data for Pinecrest Company.
Competitors in Pinecrest Company's industry have an average inventory turnover of 20.8 times.Its inventory turnover for 2014
A)indicates that the company has too little inventory on hand at the end of 2014. 
B)indicates that the company is pricing its products too low. 
C)is equal to the number of days' sales in the company's inventory. 
D)indicates that the company may have a large amount of obsolete inventory or problems in the sales department.

Quizplus · Accepted Answer

The inventory turnover ratio indicates how efficiently a company is managing its inventory. A low inventory turnover ratio may indicate that the company is holding too much inventory on hand, while a high inventory turnover ratio may indicate that the company may have a large amount of obsolete inventory or problems in the sales department. In this case, Pinecrest Company's inventory turnover is not only higher than the industry average but also significantly high, which may be a sign of potential problems in the sales department or obsolete inventory. Therefore, the best choice is D.

Pinecrest Company Use the Selected Data from Pinecrest Company's Financial