6) which of the following would best indicate that the firm is carrying excess inventory? a. a decline in sales b. a decline in the current ratio c. a decline in days' sales in inventory d. a stable current ratio with declining quick ratios e. a rise in total asset turnover

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08-11-2022
Business

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6) which of the following would best indicate that the firm is carrying excess inventory? a. a decline in sales b. a decline in the current ratio c. a decline in days' sales in inventory d. a stable current ratio with declining quick ratios e. a rise in total asset turnover

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rafikiedu08 rafikiedu08 · Answer 1 · 2022-11-11T03:40:02-05:00

A stable current ratio with declining quick ratios would best indicate that the firm is carrying excess inventory.

When a company has excess inventory on hand than is necessary to fulfill expected demand, this is referred to as excess inventory. This may result in several operational difficulties and budgetary limitations.

A steady current ratio with a decreasing quick ratio over time can be a sign that you've accumulated too much inventory. If a company's quick ratio is much lower than its current ratio, it may be severely lacking in other liquid assets and relying largely on inventory.

A loss of revenue results from having too much inventory. As demand for a certain product declines over time, excess inventory loses value and takes up "shelf space" that could be occupied by a newer product with a larger profit margin.

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