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June 7, 2024

The inventory turnover ratio

The inventory turnover ratio is cost of goods sold divided by average inventory. As discussed, the result tells us how many times inventory turned over. 365/inventory turnover rate converts the calculation to days. Example: If inventory turns over 5 times this is equal to 365/5=73 days. Question: How can we use this information in order to manage the operations of a business?

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