Decreasing Inventories Leads to a Reduction in Return on Investment

question 29

True/False

Decreasing inventories leads to a reduction in return on investment (ROI).

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Definitions:

Receivables Turnover Ratio

A financial metric used to assess how efficiently a company collects cash from its credit sales by dividing total credit sales by the average accounts receivable.

Payments Quickly

Payments quickly refers to the process of settling financial transactions or obligations in a brief period of time, enhancing liquidity and cash flow management.

Average Collection Period

The average number of days it takes for a company to receive payments from its credit customers.

Receivables Turnover

A financial metric measuring how efficiently a company collects its receivables or the speed at which it turns credits into cash.