"Corporate Finance":Inventory turnover rate

C is correct. A reduction in inventory will increase the inventory turnover (Cost of goods sold/Average inventory), which means that the days in inventory will be reduced (365/ Inventory turnover). This will lead to a reduction in the cash conversion cycle (also called net operating cycle). Cash conversion cycle consists of number of days of inventory and number of days of receivables minus number of days of payables. A is incorrect. Quick ratio will increase as the result of efficient inventory system. B is incorrect. Inventory turnover will increase as the result of efficient inventory system.

B is correct. DFL = Operating income/Operating income – Interest expense, or operating income divided by pretax earnings:  = $3.6/($3.6 – $1.2)  = 1.50 C is incorrect because it is Pre-tax income/Net income = $2.4 million/$1.4 million. A is incorrect because it is Operating income/Net income = $3.6 million/$1.4 million.