Inventory turnover ratio

Inventory turnover or stock turnover measure the status of the inventory in moving through the firm and generating sales. It is defined as :-

Inventory turnover reflect the efficiency of inventory management. Higher the ratio more will be the efficient management of inventory and vice versa. However this will not be true always, a higher inventory may be caused by low level of inventory which may result in frequent stock out, loss of sale and costomers good will.