Activity Ratios: Inventory Turnover and Days of Inventory on Hand (DOH)

All else equal, which of these scenarios will not cause a lower inventory turnover ratio?

Incorrect. This will cause inventory turnover to fall since obsolete items aren't being removed from inventory when no one buys them.

Correct. This will cause inventory turnover to rise. In the formula $$\displaystyle Inventory\ turnover =\frac{cost\ of\ goods\ }{average\ inventory}$$ the sales increase will cause cost of goods sold to rise more rapidly than average inventory, which will increase inventory turnover.

Incorrect. This will cause inventory turnover to fall. In the formula $$\displaystyle Inventory\ turnover =\frac{cost\ of\ goods\ }{average\ inventory}$$ average inventory in the denominator will rise more rapidly from increased purchases than cost of goods sold in the numerator, which isn't affected. This will cause inventory turnover to fall.

Inventory containing more obsolete items

Sales increasing more rapidly than inventory levels

Taking advantage of purchase discounts to stock up