The Average Inventory Turnover Ratio Tells the Owner How Fast

question 30

True/False

The average inventory turnover ratio tells the owner how fast merchandise is moving through the business.

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Definitions:

Inventory Turnover Ratio

A measure of how often a company sells and replaces its stock of goods during a period, calculated as cost of goods sold divided by average inventory.

Gross Profit

The difference between revenue and the cost of goods sold before deducting overhead, payroll, taxation, and interest payments.

Net Sales

Revenue from goods or services sold minus returns, allowances, and discounts.

Return On Equity (ROE)

A measure of financial performance, calculated by dividing net income by shareholder equity, indicating how well a company uses investments to generate earnings growth.