Asked by Abigail Small on Jun 18, 2024
Verified
As the inventory turnover increases, the average sales period decreases.
Inventory Turnover
A ratio showing how many times a company's inventory is sold and replaced over a specific period, indicating the efficiency of inventory management.
Average Sales Period
The average amount of time it takes for a company to sell its inventory, which can reflect its inventory management efficiency.
- Learn to perform calculations and draw interpretations from financial ratios.
- Appreciate the role of inventory management in shaping financial ratios.
Verified Answer
VL
Vanessa LopezJun 23, 2024
Final Answer :
True
Explanation :
Inventory turnover is calculated by dividing the cost of goods sold by the average inventory. As the inventory turnover increases, it means that the company is selling its inventory more quickly. This leads to a decrease in the average sales period, as products are being sold faster.
Learning Objectives
- Learn to perform calculations and draw interpretations from financial ratios.
- Appreciate the role of inventory management in shaping financial ratios.