Question

Golf Inc. and Golfanatics Corp. are close competitors. Last year, both had the same level of cost of goods sold, but Golf Inc. turned its inventory over five times during the year, whereas Golfanatics turned its inventory over every 65 days. If the objective is to keep low inventory, which of the following is true?
a. Golf Inc., did a better job because its inventory turnover was lower
b. Golfanatics did a better job because its inventory turnover was higher
c. Golf Inc., did a better job because its day sales in inventory was lower
d. Golf Inc., did a better job because its level of inventory was lower was lower

Answer 1

Answer:

b. Golfanatics did a better job because its inventory turnover was higher.

Explanation:

Inventory turnover is defined as the number of times a business sells off its inventory in a year. Businesses target higher inventory turnover as this implies that they are making more sales.

The inventory turnover of Golf Inc was 5 times in the year.

The inventory turnover of Golfanatics was every 65 days, so in a year turnover would have been= 365/65 = 5.615

So Golfanatics turned over their inventory more times (5.615 times) than did Golf Inc (5 times).