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Basic Question 2 of 8
Generally, a high inventory turnover is a sign of ______.
B. an increase in prices
C. fewer sales than planned
A. efficient inventory management
B. an increase in prices
C. fewer sales than planned
User Contributed Comments 3
| User | Comment |
|---|---|
| teddajr | Why not B - under LIFO? If the prices increase COGS will increase. Hence, inventory turnover will also increase. |
| achu | High turnover is not necessarily concurrent with an increase in prices. Consider a monopolitic competetion scenario where a company goes for high volume and low margins. They might decrease prices to get/sustain high turnover. While you might find a scenerio where your thoughts work, I believe A is the best choice by a good margin. |
| khalifa92 | the higher the turn over the faster inventory, receivables turn to cash and payables turn to be paid. |
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Learning Outcome Statements
calculate and interpret activity, liquidity, solvency, and profitability ratios
describe relationships among ratios and evaluate a company using ratio analysis
CFA® 2025 Level I Curriculum, Volume 3, Module 11.