Respuesta :
Regarding these two companies it is true that, Company A is more efficient in using its inventory to generate revenue.
Inventory Turnover = Cost of goods sold / Average inventory
- Inventory turnover counts the number of times stock is sold or used over a given time frame. It is a sign of operational effectiveness.
- By dividing the cost of items sold by the average inventory value during the time period, inventory turnover calculates how effectively a business utilises its inventory.
- Only similar organizations may be compared using inventory turnover rates, which is why merchants should pay special attention to them.
- While a larger ratio suggests good sales but may also be a symptom of inadequate inventory stocking, a comparatively low ratio may be an indication of surplus inventory or bad sales.
- Inventory turnover comparisons may be skewed by accounting practices, abrupt changes in costs, and seasonal variables.
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