Q1. The inventory turnover ratio and the number of days in inventory are least likely used to evaluate the:

A)   stability of a firm’s inventory levels.

B)   effectiveness of a firm’s inventory management.

C)   age of a firm’s inventory.

Q2. Which of the following ratio levels would suggest that a company is holding obsolete inventory?

A)   Low inventory value compared to cost of goods sold.

B)   Low inventory turnover ratio.

C)   Low number of days in inventory.

答案和详解如下：

Q1. The inventory turnover ratio and the number of days in inventory are least likely used to evaluate the:

A)   stability of a firm’s inventory levels.

B)   effectiveness of a firm’s inventory management.

C)   age of a firm’s inventory.

Correct answer is A)

Neither metric is directly relevant in evaluating the stability of a firm’s inventory levels. Determining stability would presumably require other information such as purchase and sales levels, for example. The inventory turnover ratio and the number of days in inventory can be used to evaluate the relative age of a firm’s inventory as well as the effectiveness of a firm’s inventory management.

Q2. Which of the following ratio levels would suggest that a company is holding obsolete inventory?

A)   Low inventory value compared to cost of goods sold.

B)   Low inventory turnover ratio.

C)   Low number of days in inventory.

Correct answer is B)

Low inventory turnover (high number of days in inventory) may be a sign of slow-moving or obsolete inventory, especially when coupled with low or declining revenue growth compared to the industry. Low inventory value compared to cost of goods sold, however, implies a high inventory turnover ratio. This suggests much less risk of obsolescence.

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