QUESTION 5 All of the following are true except: A high number of days inventory

Question

QUESTION 5 All of the following are true except: A high number of days inventory held could be the result of obsolete, slow-moving or inferior inventory. The days inventory held ratio measures the efficiency of the firm in managing its inventory. O A days inventory held ratio that is too low could indicate the overstocking of inventory O A low number of days inventory held is generally a sign of efficient management. QUESTION 6 All of the following statements are true except: O The fixed and total asset turnover ratios are two approaches to assessing management's effectiveness in generating sales from investments in assets. OThe fixed asset turnover considers only the firm's investment in property, plant, and equipment and is extremely important for a capital-intensive firm. O Large amounts of cash, cash equivalents, marketable securities, and long.term investments unrelated to core operations will cause the total asset turnover to be higher as the return on these items is recorded in sales. The accounts receivable, inventory and payable turnover ratios are mathematical complements to the ratios that make up the cash conversion cycle, and therefore, measure exactly what the average collection period, days inventory held, and days payable outstanding measure for a firm.

Explanation / Answer

Q5. Answer is A days inventory held ratio that is too low could indicate the overstocking of inventory. Q6. Answer is the Large amount of cash, cash equivalent, marketable securities and long-term investment unrelated to core operations will cause the total assets turnover to be higher as the return on the included in sales. Explanation: Amount invsted in non operating asssets and returns on these assets are exclsuded while computing the assets turnover ratio.

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