In comparison to industry averages, Okra Corp. has a low inventory turnover, a high current ratio, and an average quick ratio. Which of the following would be the most reasonable inference about Okra Corp.? A. Its current liabilities are too low. B. Its cost of goods sold is too low. C. Its cash and securities balance is too low. D. Its inventory level is too high. E. None of the above

Question

Kathryn Reyes

Business

22 August, 03:25

In comparison to industry averages, Okra Corp. has a low inventory turnover, a high current ratio, and an average quick ratio. Which of the following would be the most reasonable inference about Okra Corp.? A. Its current liabilities are too low. B. Its cost of goods sold is too low. C. Its cash and securities balance is too low. D. Its inventory level is too high. E. None of the above

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Answers (2)

Know the Answer?

Dereon · Answer 1

D) Its inventory level is too high

Tanya Lowery · Answer 2

Answer: D-its inventory level is too high

Explanation:

Inventory turnover is a ratio that shows a company how efficient it sells its products. A high turnover means that the company is generating sales efficiently for inventory, while a low turnover means not generating efficient sales for inventory.

Also a low quick Ratio means when a company does not have enough current assets and lacks inventory in order to cover it's short term debt

Since, Okra Corp. has a low inventory turnover, a high current ratio, and an average quick ratio, it will generate inventory that is too high leading to poor sales.