A grocery store is often cited as having higher which metric among firms?

A grocery store is often cited as having higher which metric among firms?

• A. Inventory turnover
• B. Accounts payable turnover
• C. Quick ratio
• D. Cash conversion cycle

Answer: (A)

Inventory turnover measures how many times a business sells and replaces its inventory over a period. Grocery stores move products very quickly because they sell large volumes of everyday items, including perishables with short shelf lives. This rapid turnover means they keep a lean average inventory while their cost of goods sold is high, which drives the ratio up. In practice, groceries continuously restock to meet demand, so inventory doesn’t linger on shelves, leading to a higher inventory turnover compared with many other types of firms. Other metrics focus on different aspects: accounts payable turnover looks at how fast you pay suppliers, the quick ratio gauges immediate liquidity, and the cash conversion cycle combines several factors but isn’t inherently higher just because a store is a grocery.

Inventory turnover measures how many times a business sells and replaces its inventory over a period. Grocery stores move products very quickly because they sell large volumes of everyday items, including perishables with short shelf lives. This rapid turnover means they keep a lean average inventory while their cost of goods sold is high, which drives the ratio up. In practice, groceries continuously restock to meet demand, so inventory doesn’t linger on shelves, leading to a higher inventory turnover compared with many other types of firms. Other metrics focus on different aspects: accounts payable turnover looks at how fast you pay suppliers, the quick ratio gauges immediate liquidity, and the cash conversion cycle combines several factors but isn’t inherently higher just because a store is a grocery.