Business Finance
easy question Inventory

Question Description

Which is correct:

If a firm increases its sales and cost of goods sold while holding its inventories constant, then, other things held constant, its inventory turnover ratio will decrease

A reduction in inventories held would have no effect on the current ration.

An increase in inventories would have no effect on the current ratio

If a firm increases its sales and cost of goods sold while holding it's inventories constant then other things held constant its inventory turn over ratio will increase

A reduction in the inventory trunover ratio will generally lead to an increase int eh ROE

Final Answer

The correct choice is: If a firm increases its sales and cost of goods sold while holding it's inventories constant then other things held constant its inventory turn over ratio will increase

Alex Z (997)
University of Maryland

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