Calculating the inventory turnover ratio:

Question

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The inventory turnover ratio is a measure of how efficiently a company manages its inventory and sales. It helps auditors assess whether inventory accounts are properly stated by indicating how quickly inventory is sold. It also indirectly helps in evaluating the accuracy of sales accounts, as higher turnover rates generally correlate with higher sales. Thus, both inventory and sales account statements can be scrutinized using this ratio.

Calculating the Inventory Turnover Ratio