Inventory turnover ratio by industry
Inventory turnover ratio can help companies better handle product inventory management. Thus, depending on the industry you're in, it helps to understand the realities of sales and inventory. Definition of Inventory Turnover Ratio The inventory turnover ratio is an important financial ratio that indicates a company's past ability to sell its goods. Converting inventory into cash is critical for a company to pay its obligations when they are due. How to Calculate the Inventory Turnover Very Low Inventory / Stock Turnover Ratio: Needless to explain, a very low turnover ratio of inventory will not utilize the fixed interest cost incurred on investment in inventory as explained in the above example. Benchmark or Ideal Ratio. Benchmark for inventory turnover ratio depends on the industry. A ratio which is considered good in one industry may be bad for the other.