1 Why does a company need to turnover its inventory quickly

1. Why does a company need to turnover its inventory quickly?

a- Taxes must be paid on both new and old inventory every year.

b- Excess inventory decreases liquidity.

c- Inventory does not have to show on the books if turned quickly.

d- A quick turnover will decrease employee overtime.

Solution

Answer is b. Excess Inventory decreases liquidity.

Explanation:

When the business does not turnaround its inventory quickly then there will be heavy amount of inventory stock lies with the business., which resulted in liquidity being blocked and heavy carrying cost levying on the business.