Indicate Whether Each of the Following Statements About Financial Statement

question 102

Short Answer

Indicate whether each of the following statements about financial statement analysis is true or false.
_____ a)Having too little inventory can hurt a company's profitability because of lost sales.
_____ b)Having too much inventory can hurt a company's profitability because of excess costs.
_____ c)Generally,a lower inventory turnover indicates that merchandise is being handled more efficiently.
_____ d)Average days to sell inventory is the number of times,on average,that inventory is replaced during the year.
_____ e)Values for the inventory turnover ratio vary widely among different industries.

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Definitions:

Total Asset Turnover

A financial ratio that measures a company's efficiency in using its assets to generate sales, calculated as net sales divided by average total assets.

Decrease Ratio

A financial metric that quantifies the reduction in a particular variable or metric relative to another, often used to assess performance or efficiency decline.

Transactions

A series of financial activities or exchanges between parties that can affect the accounting records of a business.

Prepaid Insurance

Insurance premiums paid in advance by a company, recorded as an asset on the balance sheet until the coverage period comes into effect.