A firm is conducting an analysis of trends over time and discovers that its inventory turnover has declined. This may be due to
A) an increase in sales.
B) an increase in cost of goods sold.
C) an increase in inventory purchases.
D) a decrease in inventory purchases.

Question

Quizplus · Accepted Answer

An increase in inventory purchases without a corresponding increase in sales can lead to a higher inventory level, thus reducing the inventory turnover ratio, which indicates how often a company sells and replaces its stock of goods during a period.

A Firm Is Conducting an Analysis of Trends Over Time