The inventory turnover ratio
A) measures management's ability to productively employ all of its resources.
B) measures the efficient use of assets held for resale.
C) is a stringent measure of liquidity.
D) provides a measure of the strength of the sales mix the company currently employs.

Question

Quizplus · Accepted Answer

The inventory turnover ratio measures the efficient use of assets held for resale. It shows how well a company is managing its inventory and whether it is selling products efficiently. It is calculated by dividing the cost of goods sold by average inventory. A higher inventory turnover ratio indicates that a company is selling products quickly and efficiently.

The Inventory Turnover Ratio