An inventory turnover ratio
A) measures the number of times, on average, the inventory was sold during the period.
B) is a measure of solvency that focuses on efficient use of inventory.
C) that is significantly lower than the industry average usually indicates difficulty with selling that inventory and the likelihood of incurring lower than average storage costs.
D) that is significantly higher than the industry average may indicate that a company is maintaining inventory levels that are too high.

Question

Quizplus · Accepted Answer

The inventory turnover ratio measures how many times a company's inventory is sold and replaced over a period, indicating the efficiency of inventory management.

An Inventory Turnover Ratio