Question

Which of these would cause inventory turnover to increase the most? A : keeping the amount of inventory on hand constant but decreasing sales B : increasing the amount of inventory on hand C : keeping the amount of inventory on hand constant but increasing sales D : decreasing the amount of inventory on hand and increasing sales

Answer 1

D : decreasing the amount of inventory on hand and increasing sales

Step-by-step explanation:

Inventory turnover shows the number of times a business has sold and replaced its stock over a given time. If a company has a high volume of sales, its turnover is likely to be high.

A decrease in inventory implies that a company will have less merchandise available for sale at any given time. To stay in business, it has to keep on procuring or producing more. If a business increases its sales, then its products will be diminishing fast from its shelves. It means the company will require more merchandise to sell.

A combination of decreasing inventory and increasing sales will result in high inventory turnover. The few stocks available will be sold fast, meaning the company will be replacing the inventory many times.