Explaining the upward trend in the inventory turnover ratio requires more examination into the factor responsible for the cause of the increase in inventory turnover. Inventory turnover could be as a result of declining inventory or increasing sales.
Inventory turnover is an example of an activity ratio Activity ratios measure a firm's efficiency in performing daily tasks.
Inventory turnover is cost of goods sold divided by average inventory.
The higher inventory turnover is, the better. But it should be noted that a higher inventory turnover could be a s result of declining inventory or increasing sales.
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