Answer
Inventory turnover depicts the inventory's liquidity. For the liquidity to be determined, the cost of goods sold is placed in the denominator. This denominator helps determine the number of times an entity sells its inventory in a specific duration. A business could experience stock unavailability due to high inventory turnover.
Work Step by Step
Inventory turnover depicts the inventory's liquidity. For the liquidity to be determined, the cost of goods sold is placed in the denominator. This denominator helps determine the number of times an entity sells its inventory in a specific duration. A business could experience stock unavailability due to high inventory turnover.
