Question

New Coffee Company, LLC uses JIT (just-in-time) logistical supply methods. This indicates that the company doesn't really keep large stocks of coffee on hand, which is cheaper from the standpoint of operations, but more risky because of the potential havoc any significant under- or over-supply of product could wreak. Which of the following ratios is of the utmost importance to New Coffee Company?A. Debt-to-assets ratiosB. Inventory turnover rationsC.Average collection period ratiosD. Current ratios

Answer 1

Answer:

B) Inventory turnover ratios

Explanation:

Inventory turnover measures how many times a business sells and replaces its merchandise or materials inventory during an accounting period, usually a year.

One of the basic goals of JIT is to lower the total inventories in a company, therefore increasing the inventory turnover ratio. This reduces the company's operating costs.