What is the Inventory Turnover Activity ratio ?
Answer:
This ratio illustrates how many times your initial inventory is replaced in a year. Cost of Goods Sold, divided by Average Inventory = IT Ratio. Also, Days in the year, divided by the Inventory Turnover Ratio = Number of days in Inventory Ratio. Faster turnovers are viewed as a positive trend. The result is meaningful only when compared to other businesses in the same industry or the same business' past inventory turnover.
