What is Inventory Turnover?
Inventory turnover shows the number of times the inventories are replenished within one accounting cycle. The ratio can be obtained by dividing the sales by inventory. While the quick ratio measures the liquidity and points out the inventory piling problem, the inventory turnover confirms whether or not the major portion of the current assets of the firm are tied up in inventory. This ratio is also used in measuring the operating cycle and cash cycle of the firm. A higher turnover is desirable as it reflects the liquidity of the inventories.
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