Why Would a Slow Inventory Turnover Rate Be a Red

question 92

Multiple Choice

Why would a slow inventory turnover rate be a red flag in a financial statement analysis?

• A)The company may have obsolete inventory.
• B)The company may have bad salespeople.
• C)The company may be overstating inventory.
• D)Both A and C are reasons why it would be a red flag.

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Definitions:

Original Investment

The initial sum of money put into a project, business, or financial asset.

Venture Growth

The process of expanding a business venture in terms of operations, market share, and profitability.

Aspiring Entrepreneur

An individual who aims to start and run their own business, often fueled by a passion for innovation and self-employment.

Due Diligence

The thorough investigation or exercise of care that a reasonable business or person is normally expected to take before entering into an agreement or a financial transaction.