Inventories and Ratios
October 2nd, 2022
Which is true and why?
a) A reduction in inventories held would have no effect on the current ratio.
b) An increase in inventories would have no effect on the current ratio.
c) If a firm increases its sales while holding its inventories constant, then, other things held constant, its inventory turnover ratio will increase.
d) A reduction in the inventory turnover ratio will generally lead to an increase in the ROE.
e) If a firm increases its sales while holding its inventories constant, then, other things held constant, its inventory ratio will decrease.