Asked by Sewar Rawabdeh on Jun 10, 2024
Verified
Buying inventory in large lots to take advantage of quantity discounts can be responsible for a high inventory turnover ratio.
Inventory Turnover Ratio
A measure of how many times a company's inventory is sold and replaced over a specific period, indicating the efficiency of inventory management.
Quantity Discounts
Price reductions given to customers purchasing large volumes.
- Determine and evaluate various financial ratios, like total asset turnover, inventory turnover, and accounts receivable turnover.
- Explain the significance of managing marketable securities and inventory in the context of analyzing financial ratios.
Verified Answer
JE
Jerton EvansJun 15, 2024
Final Answer :
False
Explanation :
Buying inventory in large quantities for discounts typically results in a lower inventory turnover ratio because it increases the average inventory on hand, taking longer to sell through.
Learning Objectives
- Determine and evaluate various financial ratios, like total asset turnover, inventory turnover, and accounts receivable turnover.
- Explain the significance of managing marketable securities and inventory in the context of analyzing financial ratios.