What are the implications of having a high turnover rate in inventory management?

Having a high turnover rate in inventory management indicates that a pharmacy is effectively selling its stock quickly. This leads to better cash flow, as funds tied up in inventory are minimized and can be redirected into other areas of the business. When inventory turnover is high, it signifies efficient sales and prompt replenishment of products. This means that the pharmacy is likely to experience fewer instances of products becoming obsolete or expiring on the shelf, contributing to overall improved financial health of the establishment.

In contrast, while the other options reflect potential issues related to inventory management, they do not align with the positive implications of a high turnover rate. Increased holding costs would typically occur with slow-moving inventory, as more funds are allocated to storage and maintenance of stock. A high frequency of stockouts suggests inadequate inventory levels to meet customer demand, which can lead to lost sales. Increased storage space would not be an implication of effective turnover; instead, efficient turnover might allow a business to reduce storage requirements. Thus, the choice related to better cash flow accurately captures the essence of the benefits derived from a high turnover rate in inventory management.