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    Profit Percentage and Inventory Turnover

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    An acquaintance with an interest in investing says "I would not invest in Company A because their gross profit percentage is low and their inventory turnover ratio is high." Is your acquaintance correct in their concerns? Reply to your acquaintance.

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    I would respond by saying that he/she has it a bit backwards. You want to invest in companies that have a high inventory turnover. A high inventory turnover means that the company turned over (or went through) their inventory X number of times throughout the year. This shows that the company is buying products, selling them, moving them out, and then needs to buy additional ...

    Solution Summary

    This solution discusses low gross profit percentages and high inventory turnover rates.