Alternatively, they may have underestimated the demand, resulting in missed sales opportunities. If your company has overestimated the demand, they may wind up with too much inventory on hand. The inventory turnover ratio provides a clear of your company inventory management efficiency.It could also indicate that sales and production aren’t in sync. A low ratio indicates the demand for products is weak and/or customer needs are shifting. A high ratio means that your company is selling inventory efficiently. The higher the inventory turnover ratio, the better.Inventory turnover is the number of times your company sells and replaces its inventory in a defined period of time. ![]() How Is Your Inventory Turnover Interpreted? COGS can include the cost of materials, labor costs, overhead, and fixed costs that are directly related to the production of the product.
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