Question

The inventory turnover ratios for Proctor and Gamble over the past three years are 5.09, 5.72, and 5.92 times, respectively. Explaining the upward trend in the inventory turnover ratio requires:

Answer 1

Explaining the upward trend in the inventory turnover ratio requires more examination into the factor responsible for the cause of the increase in inventory turnover. Inventory turnover could be as a result of declining inventory or increasing sales.

Description of inventory turnover.

Inventory turnover is an example of an activity ratio Activity ratios measure a firm's efficiency in performing daily tasks.

Inventory turnover is cost of goods sold divided by average inventory.

The higher inventory turnover is, the better. But it should be noted that a higher inventory turnover could be a s result of declining inventory or increasing sales.

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