Inventory Turnover

Two companies each recorded $19,278,000 in cost of goods sold for the year. Company A had average inventory of $107,100 on hand during the year. Company B's average inventory was $1,285,200. One company is a car dealer, and the other is a wholesaler of fresh fruits and vegetables. Which company sells cars, and which company sells fruits and vegetables?

a.

Company A sells cars because it has a higher inventory turnover ratio, which means it takes longer to sell inventory and cars take longer than fruits and vegetables to sell. Thus Company B sells fruits and vegetables.

b.

Company A sells fruits and vegetables because it has a higher inventory turnover ratio, which means it is quicker to sell inventory and fruits and vegetables are quicker to sell than cars. Thus Company B sells cars.

c.

Company A sells cars and Company B sells fruits and vegetables because the higher the inventory ratio, the longer it takes to sell the inventory and cars do not take as long as fruits and vegetables to sell.

d.

Company A sells fruits and vegetables and Company B sells cars because the higher the inventory ratio the longer it takes to sell the inventory and fruits and vegetables take longer to sell than cars.