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Meaning of ratio

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Querist : Anonymous

Querist : Anonymous (Querist)

11 October 2011 HI

RESPECTED MEMBBER

I WANT TO KNOW MEANING OF INVENTORY TURNOVER RATIO?

WHAT IS GOOD FOR COMPANY WHETHER IT SHOULD BE HIGH OR LOW?

WHAT IS CONSEQUENCES OF HIGH AND LOW TURNOVER RATIO?

FOR GOOD COMPANY PERFORMANCE WHAT SHOULD BE THERE HIGH OR LOW?

CA SUMiT PATWARi

CA SUMiT PATWARi (Expert)

11 October 2011 Inventory turnover ratio is the ratio of turnover of goods manufactured to average inventory maintained.

A high inventory turnover ratio is good (ratio = turnover of stock/avg. inventory)

A high turnover indicates that the company has to maintain a lower inventory for its operations (which is good as it indicates investment in stock/current asset is less, sales is healthy, the company performance is good etc)

CA Pushpendra Gaur

CA Pushpendra Gaur (Expert)

12 October 2011 In simple words i will like to add that

Inventory turnover ratio tells u the times in a particular year, u were able to sell ur average stock that u r maintaing

High ratio highlights that u r able to sell ur goods frequently that yr stock is moving very fast

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