Red Seal Parts Technician Practice Exam

Inventory turnover refers to the rate at which a company sells its inventory and then replenishes it over a specific period. This metric is essential in assessing how efficiently a business manages its inventory. A high inventory turnover indicates that a company is selling goods quickly and that its inventory is being replaced frequently. This can reflect strong sales performance, effective inventory management, and reduced holding costs.

In practical terms, businesses strive for an optimal inventory turnover ratio to ensure they are not overstocking or understocking items, allowing for a streamlined operation that meets customer demand without excess investment in inventory. This measure can also help in forecasting future inventory needs based on past sales trends.