Analysing the financial statements of a firm, you observe that
the inventory period has jumped from 30 days to 45 days between
last year and this year. Asking the CEO what the reason is, she
replies that sales have increased by 50% over the period, stocks
have also increased 50%.
Group of answer choices
A) You are satisfied with the answer as higher sales do indeed
usually require more inventory
B) You are not satisfied with the answer as a proportional
increase in sales and inventory will not impact the inventory
period ratio
C) You are not satisfied with the answer as higher sales do
usually come with productivity gains, thereby leading to a
proportionally lower increase in inventory
D) You are satisfied with the answer as the CEO should know what
is happening in the company
I am thinking of Option C since an increasing inventory period
means it is taking a longer to sell the goods, and in this
scenario, there is an increase in sales which means that the
company should be seeing a decrease in the inventory period instead
of an increase in inventory period.
Do let me know if my analysis towards this case is correct on
incorrect?
Thanks!
Analysing the financial statements of a firm, you observe that the inventory period has jumped from 30 days to 45 days b
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answerhappygod
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Analysing the financial statements of a firm, you observe that the inventory period has jumped from 30 days to 45 days b
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