Question

Two businesses operate in the same industry,one has an inventory turnoverperiod that is no longer than the industry average.The other has an inventories turnover period that is shorter than the industry average.What is the possible explanation for each business's inventories turnover period rations?

Answer 1

1. The first business has just adequate inventory and sales volume to meet customer need

2. The second business has insufficient inventory and high sales volume.

Step-by-step explanation:

Inventory turnover period is defined as the time it takes a business to completely sell off its inventory. It represents time before the business will need to replenish goods.

In the situation where inventory turnove rperiod is no longer than the industry average, it means that inventory is neither too much or too little but optimal for the customers.

Also it means there is an optimal sales volumes.

In the situation where inventories turnover period is shorter than the industry average. This implies that there is insufficient inventory or there is fast sales of products.