Which of the following is a positive sign that a company is selling its inventory quickly?

• A. A high days sales in inventory
• B. A high inventory turnover ratio
• C. A low net sales figure
• D. A low accounts receivable turnover ratio

Answer: (B)

Verified step by step guidance

1. Understand the concept of inventory turnover ratio: The inventory turnover ratio measures how many times a company sells and replaces its inventory during a specific period. A higher ratio indicates that the company is selling its inventory quickly.
2. Compare the options provided: Analyze each option to determine its relevance to inventory turnover and sales efficiency. For example, a high days sales in inventory indicates slower inventory movement, which is not a positive sign.
3. Focus on the correct answer: A high inventory turnover ratio is a positive sign because it reflects efficient inventory management and strong sales performance.
4. Eliminate irrelevant options: A low net sales figure and a low accounts receivable turnover ratio are not directly related to inventory turnover efficiency and do not indicate quick inventory sales.
5. Conclude the reasoning: The correct answer is 'A high inventory turnover ratio' because it directly signifies that the company is selling its inventory quickly and efficiently.