A high inventory turnover reveals that the business is having trouble moving its stock. This statement is false.
When a company's inventory turnover ratio is high, it means that its stock is being sold off quickly. This may mean that the company's products are well-liked by consumers, are being offered at a low price, or are benefiting from an effective marketing effort.
Even while a high inventory turnover rate is typically seen as a sign of success, it can be detrimental if it becomes too high. A spike in sales may need you to regularly restock your goods, and if you can't keep up with demand, stockouts may occur.
Inventory turnover measures the frequency with which a company's stock is changed in proportion to its cost of sales. A higher ratio is often preferred. Low inventory turnover rates might be a sign of underwhelming sales or overstocking.
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