Which of the following statements is CORRECT?
A. A reduction in inventories will have no effect on the current ratio.
B. An increase in inventories will have no effect on the current ratio.
C. If a firm increases its sales while holding its inventories constant, then, other things held constant, its inventory turnover ratio will increase.
D. A reduction in the inventory turnover ratio will generally lead to an increase in the ROE.
E. If a firm increases its sales while holding its inventories constant, then, other things held constant, its fixed assets turnover ratio will decline.
Answer: C
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