Questions: Johnson Company has a high inventory turnover that has increased over the last year. All of the following statements are true regarding this situation except Johnson Company has a cost of goods sold that is increasing relative to its average inventory. is increasing the amount of inventory on hand relative to sales. is minimizing funds tied up in inventory. may be losing sales due to inventory shortages.

The answer is: Johnson Company is increasing the amount of inventory on hand relative to sales.

A high inventory turnover ratio indicates that the company is selling and replacing its inventory quickly. This often means that the cost of goods sold (COGS) is high relative to the average inventory, as the company is efficiently managing its stock levels.

This statement is not true in the context of a high inventory turnover. A high inventory turnover suggests that the company is not holding onto inventory for long periods, which means it is not increasing the amount of inventory on hand relative to sales. Instead, it is likely reducing inventory levels to match sales more closely.

A high inventory turnover ratio typically indicates that a company is effectively managing its inventory levels, thereby minimizing the amount of capital tied up in unsold goods. This is a positive aspect of high inventory turnover.

While a high inventory turnover is generally positive, it can also indicate that the company is not keeping enough inventory on hand to meet demand, potentially leading to lost sales if products are not available when customers want them.