Inventory( or Stock) Turnover Ratio:
It is to identify how fast the inventory moves out or sold. It measures the activity/ liquidity of inventory of a firm. It indicates the number of times inventory is replaced during the year. We can compute in two ways. One is the way to calculate dividing the cost of goods sold by the average inventory and the other is replaced by sales instead of cost of goods sold and instead of average inventory take the closing inventory. Average inventory is calculated on the basis are as follows.
Taking from January to January of opening inventory add them and divided by thirteen will be resulted to industry average.
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