Inventory turnover is a profitability ratio.
Inventory turnover is the rate at which the inventory stock is sold, or used, and replaced. The higher ratio tends to point to strong sales and a lower one to weak sales. This ratio is calculated by dividing the cost of goods by the average inventory for the same period.
Inventory turnover is a profitability ratio, as the higher the turnover of the inventory, the higher the cost which can be suppressed so that the greater the profitability of a company.
Hence, inventory turnover shows how quickly a company can sell its inventory.
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