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Current ratio and inventory

FFidha2y ago
If current ratio = more than 1 , Is the inventory slow moving?
kengarrettkengarrettTutor2y ago#1
Not necessarily. You could have a CR>1 with no inventory at all. Of course, higher inventory will increase the CR, but that does not necessarily mean inventory is sticking. For example, current liabilities might be very low. The best indication of slow moving inventory is to calculate the inventory days: inventory x 365/cost of sales. If CoS not available use purchases. If this rises from our uearto the next order is high compared to industry averages) it implies inventory might be slow-moving.
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