A Lower Days' Sales in Inventory for Company X When

question 33

Multiple Choice

A lower days' sales in inventory for Company X when compared to other companies, indicates that Company X:

• A)is able to sell its inventory quickly.
• B)is spending more on inventory storage.
• C)is incurring higher insurance costs.
• D)is holding excess obsolete inventory.

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Definitions:

Interval Measure

The interval measure is a liquidity metric that estimates how long a company can operate using its current liquid assets without needing additional financing.

Quick Ratio

A measure of a company's ability to meet its short-term obligations with its most liquid assets. It is calculated as (current assets - inventories) / current liabilities.

Inventory

The goods and materials a business holds for the ultimate goal of resale or processing.

Current Ratio

A measure of how well a company can satisfy its short-term due debts, revealing its liquidity over the year.