Question

An inventory turnover of 3.7 indicates that a retailer sells its inventory:

1) for 37 percent of cost times cost.
2) every 3.7 months.
3) 3.7 times a year.
4) about every four weeks.
5) about every four days.

Answer 1

An inventory turnover of 3.7 means that a retailer sells and replaces its inventory 3.7 times in a year, indicating the company's inventory management efficiency.

Step-by-step explanation:

An inventory turnover of 3.7 means that a retailer sells and replaces its inventory 3.7 times in a year, indicating the company's inventory management efficiency.

An inventory turnover of 3.7 implies that a retailer sells and replaces its entire inventory 3.7 times a year. Inventory turnover is a key measure of inventory management effectiveness and overall efficiency in supply chain operations. It does not refer to selling inventory at a particular percentage of its cost (eliminating option 1), nor does it specify the exact time frame in terms of months or weeks (which rules out options 2 and 4).

It also does not pertain to days (eliminating option 5). The correct answer is therefore option 3: 3.7 times a year. Knowing the inventory turnover is vital for a retailer as it indicates the liquidity of its inventory and can influence business strategies for inventory control and purchasing.