Final answer:
Inventory ratio analysis, such as inventory turnover ratio and number of days’ sales in inventory ratio, can provide insights into a company's operational efficiency, liquidity, and market demand.
Step-by-step explanation:
Inventory ratio analysis, such as inventory turnover ratio and number of days’ sales in inventory ratio, can provide insights into a company's operational efficiency, liquidity, and market demand.
The inventory turnover ratio measures how quickly a company is able to sell and replace its inventory. A high ratio indicates efficient operations, while a low ratio suggests poor management or weak demand.
The number of days’ sales in inventory ratio measures the average number of days it takes for a company to sell its inventory. A shorter time period indicates high demand and efficient inventory management.