Question

Home Depot is reducing its inventory levels, developing a steadier flow of deliveries from suppliers and eliminating the need for employees to store and retrieve products from upper shelves using ladders and forklifts. These changes will have which of the follow impacts?

a. Increasing gross margins and decreasing inventory turnover

b. Increasing gross margins and increasing inventory turnover

c. Decreasing gross margins and decreasing inventory turnover

d. Decreasing gross margins and increasing inventory turnover

Please explain answer

Answer 1

Answer: Option D ( Decreasing gross margins and increasing inventory turnover )

Explanation:

Yes, as a result of these changes the impact will be decreasing gross margins and increasing inventory turnover because as the stock levels decreases the result will be decrease in the gross margin. And on the other side a steadier flow of deliveries from suppliers leads to increase in the sales as a result the cost of sales will also increases, if cost of sales increases and stock level decreases the stock turnover increases as the stock turnover formula is cost of sales divided by average stock held.Therefore the impacts will be decreasing gross margins and increasing inventory turnover.

Thanks...