Inventory Turnover Increase Signals Faster Movement and Efficiency

Steps:

• Inventory turnover ratio = cost of goods sold / average inventory; higher ratio means inventory sells faster.
• Current period (5.6) exceeds previous (4.8), indicating acceleration in turnover.
• Statement 1 claims slower movement, but higher ratio refutes this.
• Statements 2 (quicker movement) and 3 (better efficiency) align with the increase.

Why C is correct:

• C selects statements 2 and 3, matching the definition of higher turnover as faster inventory cycling and improved management efficiency.

Why the others are wrong:

• A includes statement 1, which incorrectly suggests slower movement despite the ratio rise.
• B selects only statement 1, ignoring the actual faster turnover.
• D omits statement 3, which validly explains efficiency gains from the change.

Final answer: C