U2, AOS 1 - Lesson 5 - CFS and ITO

Question 1

What is inventory turnover?

Answer 1

Inventory turnover is a ratio that shows how many times a company’s inventory is sold and replaced over a period.

Question 2

True or False: A higher inventory turnover ratio generally indicates effective inventory management.

Answer 2

True

Question 3

Fill in the blank: The formula for calculating inventory turnover is _____ divided by average inventory.

Answer 3

cost of goods sold

Question 4

What does a slow inventory turnover ratio suggest about a business?

Answer 4

It suggests that a business may be overstocked or facing weak sales.

Question 5

Which of the following factors can affect inventory turnover? (A) Sales volume (B) Pricing strategy (C) Supply chain efficiency (D) All of the above

Answer 5

D) All of the above

Question 6

True or False: Faster inventory turnover typically indicates better liquidity.

Answer 6

True

Question 7

Fill in the blank: A slow inventory turnover ratio may lead to ________ in a company’s liquidity.

Answer 7

decreased cash flow

Question 8

What is the relationship between inventory turnover and profitability?

Answer 8

Faster inventory turnover can lead to increased profitability by reducing holding costs and minimising the risk of obsolescence.

Question 9

Multiple Choice: Which of the following can negatively impact inventory turnover? A) Efficient supply chain management B) Excessive stock levels C) Regular sales promotions

Answer 9

B) Excessive stock levels