Multiple Choice
Which type of project is most likely to result in an increase in a company's net sales?
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4. Merchandising Operations
Net Sales
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Which of the following is a positive sign that a company is selling its inventory quickly?
A
A high days sales in inventory
B
A high inventory turnover ratio
C
A low net sales figure
D
A low accounts receivable turnover ratio
Verified step by step guidance1
Understand the concept of inventory turnover ratio: The inventory turnover ratio measures how many times a company sells and replaces its inventory during a specific period. A higher ratio indicates that the company is selling its inventory quickly.
Compare the options provided: Analyze each option to determine its relevance to inventory turnover and sales efficiency. For example, a high days sales in inventory indicates slower inventory movement, which is not a positive sign.
Focus on the correct answer: A high inventory turnover ratio is a positive sign because it reflects efficient inventory management and strong sales performance.
Eliminate irrelevant options: A low net sales figure and a low accounts receivable turnover ratio are not directly related to inventory turnover efficiency and do not indicate quick inventory sales.
Conclude the reasoning: The correct answer is 'A high inventory turnover ratio' because it directly signifies that the company is selling its inventory quickly and efficiently.
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