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Inventory turnover ratio

Inventory turnover

Description

Inventory turnover ratio (stock turnover) shows the number of time the inventory is turned over in the period of time. Most often this ratio is calculated for the period of one year, but other periods are also possible. Data to calculate this ratio is collected from balance sheet and income statement.

Norms and limitations

High levels of inventory indicate that a stock is being well managed as low value may result an ineffective management of inventory.

Different industries may have different values of this ratio, so there are no general norms.

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