What formula measures how many times inventory is sold and replaced across an accounting period?
AInventory Turnover Ratio
BDays Sales of Inventory (DSI)
CAsset Turnover Ratio
DQuick Turnover Ratio
Explanation
• Inventory Turnover Ratio formula: $text{Inventory Turnover} = frac{text{Cost of Goods Sold (COGS)}}{text{Average Inventory}}$.
• A higher ratio indicates rapid inventory movements and efficient stock management without excess holding costs.
• Days Sales of Inventory (DSI) is calculated as $365 / text{Inventory Turnover}$.
Exam Relevance
- Topic: Financial Statement Analysis
- Subtopic: Activity Ratios
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