ECONOMICS

Detailed explanation-1: -The turnover ratio is derived from a mathematical calculation, where the cost of goods sold is divided by the average inventory for the same period. A higher ratio is more desirable than a low one as a high ratio tends to point to strong sales.

Detailed explanation-2: -The stock turnover ratio formula is the cost of goods sold divided by average inventory.

Detailed explanation-3: -Inventory turnover measures how efficiently a company uses its inventory by dividing its cost of sales, or cost of goods sold (COGS), by the average value of its inventory for the same period. It is an especially important efficiency ratio for retailers.

Detailed explanation-4: -The inventory turnover ratio formula is equal to the cost of goods sold divided by total or average inventory to show how many times inventory is “turned” or sold during a period. The ratio can be used to determine if there are excessive inventory levels compared to sales.

Detailed explanation-5: -Stock turnover ratio indicates how efficiently the firm’s investment in inventories is converted to sales and thus depicts the inventory management skills of the organization. It is considered an activity ratio as it measures the efficiency of the company in using its resources.