Which One of the Following Statements About the Inventory Turnover

question 22

Multiple Choice

Which one of the following statements about the inventory turnover ratio is NOT correct?

• A) It is calculated by dividing inventory by cost of sales.
• B) It measures how many times the inventory is turned over into saleable products.
• C) The more times a company can turn over the inventory, the better.
• D) Too high a turnover or too low a turnover could be a warning sign.

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Definitions:

FCFE

Free Cash Flow to Equity (FCFE) is the amount of cash available for distribution to shareholders after all expenses, reinvestment, and debt payments have been made.

Intrinsic Value

The actual, inherent value of a financial asset, determined through fundamental analysis without considering its market price.

Per Share FCFE

Free Cash Flow to Equity (FCFE) calculated on a per-share basis, indicating the amount of cash available to shareholders per share.

Required Return

The minimum expected return by investors for investing in a risky asset, considering the risk level compared to the risk-free rate.