The Mystery Book Nook is a new shop in a busy suburban mall. Which of the following will contribute to a healthy activity ratio for it?
A) having a high owners' equity
B) keeping enough cash on hand
C) having high net sales revenues
D) having enough liquidatable assets
E) maintaining a small inventory
Answer: E
Explanation: E) Maintaining a small inventory contributes to a high activity ratio because the value of inventory appears in the denominator of the activity ratio; if the cost of goods sold is high, it indicates high efficiency in sales turnover.
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