Inventory Turnover Period Increase Signals Slower Turnover

Steps:

• Recall inventory turnover period = 365 / (COGS / average inventory); longer period means slower turnover due to higher inventory or lower COGS.
• Identify change: from 90 to 120 days, so turnover slowed.
• Evaluate reasons: decreased sales lowers COGS, slowing turnover; increased purchases raises inventory levels, slowing turnover.
• Match to options: reasons 2 (purchases increased) and 3 (sales decreased) explain the slowdown.

Why C is correct:

• Option C pairs increased purchases (boosts inventory, per inventory formula) and decreased sales (reduces COGS, slowing ratio).

Why the others are wrong:

• A: Decreased purchases likely lowers inventory, speeding turnover; contradicts slowdown.
• B: Both decreased purchases and increased sales speed turnover via lower inventory and higher COGS.
• D: Increased sales speeds turnover via higher COGS, offsetting any purchase effect.

Final answer: C