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Inventory Turnover Ratio
A metric that measures how frequently inventory is sold and replaced over a certain period, critical for optimizing stock levels.
Implications
(Same as Inventory Turnover Rate above) The ratio of the cost of goods sold to average inventory, used to measure how effectively inventory is being managed and how quickly it is being sold and replaced within a period.
Example
Example: A retail store with an inventory turnover ratio of 6 means it sells and replaces its inventory six times a year, indicating effective inventory management practices that minimize holding costs and avoid overstocking.
Related Terms
Same as above.
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