Use this accounting resource to improve your accounting knowledge and bookkeeping understanding. All of these accounting terms have been reviewed and are written so they can be understood for a wide range of accountants, bookkeeppers, cpas professionals.
Please pick a letter to proceed to the terms associated with that letter.
Inventory turnover ratio measures the average efficiency of the company in managing and selling inventories during the reporting period. The number is calculated by dividing the Cost of Sales annualized by the average inventory value. For instance, if the company's Cost of Goods Sold for the 12 month period is $500,000, and their average inventory balance through the year was 50,000, then they are said to have a turnover rate of ten times. In most cases, a company is seeking a higher turnover rate, indicating a more efficient management of inventory.
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