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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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A high inventory turnover ratio provides evidence that a company is having problems with stockouts and disgruntled customers. Do you agree? Explain.

To determine

Explain if high inventory turnover ratio signifies problems with stockouts and dissatisfied customers.

Explanation

Inventory turnover ratio

Accounts receivable turnover ratio is a measure of liquidity, which evaluates how quickly inventory is converted to cash.

Just in time or JIT system of manufacturing focusses on inventory reduction and producing quality products. High inventory ratio has been associated with problems of stockouts and dissatisfied customers. However, JIT system of manufacturing views high turnover ratio positively...

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