Inventory turnover measures how quickly a company sells and replaces its inventory. A higher ratio signifies efficient management, minimizing holding costs. Regularly assessing turnover aids in optimizing stock levels and enhancing overall operational and financial performance.
Inventory turnover is a crucial metric for evaluating inventory management efficiency. A higher inventory turnover ratio indicates effective management, reflecting the ability to sell and replace inventory quickly, minimizing holding costs and potential obsolescence.
Conversely, a low turnover may suggest overstocking or slow-moving inventory, leading to increased carrying costs and capital tied up.
Regularly monitoring and optimizing inventory turnover helps ensure adequate stock levels, timely sales, and improved cash flow, contributing to overall operational and financial health. It is a key indicator for businesses to assess their inventory management effectiveness and make informed decisions for better supply chain performance.