The Inventory Turnover and Current Ratio Are Related

question 82

True/False

The inventory turnover and current ratio are related.The combination of a high current ratio and a low inventory turnover ratio, relative to industry norms, suggests that the firm has an above-average inventory level and/or that part of the inventory is obsolete or damaged.

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Definitions:

CAFTA

The Central America Free Trade Agreement, a trade agreement between the United States and Central American countries to reduce trade barriers and increase economic cooperation.

Trade Agreement

A treaty between two or more nations regarding the terms of trade between them, often aiming to reduce tariffs and foster trade.

Central America

A region located in the southernmost part of North America, consisting of seven countries between Mexico to the north and Colombia to the south, known for its diverse geography and cultures.

International Monetary Fund

An international organization that aims to promote global economic stability and growth by providing monetary cooperation and financial assistance to its member countries.