purpose of inventory turnover ratio

purpose of inventory turnover ratio is to measure how quickly a company sells and replaces its inventory within a specific period. A high inventory turnover ratio indicates that a company is efficiently selling its products, while a low ratio may suggest overstocking, slow sales, or inefficient inventory management. The inventory turnover ratio is calculated by dividing the cost of goods sold (COGS) by the average inventory value during a given period. This ratio helps businesses assess their inventory management strategies and improve profitability.