The inventory turnover ratio can be used to measure a company’s effici

QUESTION

The inventory turnover ratio can be used to measure a company’s efficiency.

Indicate whether the statement is true or false.

ANSWER

Answer: TRUE
Explanation: The inventory turnover ratio consists of costs of goods sold in one year divided by the average value of the inventory. If this figure is high, it indicates that the company makes good sales compared with its inventory. If it is low, it may indicate the company is not selling its inventory quickly enough.