Quick Finance Tip - Inventory Turnover

• Inventory Turnover is an Activity Ratio. 
• What Does It Tell Us: Number of Times Inventory is Sold
• Formula: Cost of Goods Sold "COGS"/Average Inventory

Ratios provide insights to:

1. Economy and Economic Relationships
2. Financial Flexibility
3. Relative Perspectives of Financial Performance (over time); and
4. Comparability with peers.

Shortcomings or limitations includes:

1. Hetero or Homogenitiy of Operating Activities
2. Continual Questioning of Consistency
3. Judgement Calls with Financial Statement Implications