The inventory turnover ratio:

Question

Quizplus · Accepted Answer

The inventory turnover ratio measures how efficiently a company is managing its inventory by showing how many times the company sold its average level of inventory during a period. A higher inventory turnover ratio indicates more efficient inventory management.

Option A is incorrect because it calculates the inventory turnover ratio by dividing cost of goods sold by net sales, which gives the company's gross profit ratio.

Option C is incorrect because the price of inventory items is not directly related to the inventory turnover ratio.

Option D is incorrect because the price of inventory items is not the only factor affecting the inventory turnover ratio. The ratio can also be affected by the frequency of sales, the volume of sales, and the amount of inventory held.

The Inventory Turnover Ratio