The inventory turnover and current ratio are related.The combination of a high current ratio and a low inventory turnover ratio, relative to industry norms, suggests that the firm has an above-average inventory level and/or that part of the inventory is obsolete or damaged.

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A high current ratio indicates that the company has sufficient current assets to cover its current liabilities, while a low inventory turnover ratio suggests that the company is not selling its inventory quickly enough. Therefore, if a company has both a high current ratio and a low inventory turnover ratio, it may indicate that the company has an excessive inventory level or that some of its inventory is obsolete or damaged.

The Inventory Turnover and Current Ratio Are Related