One of the common reasons for that to occur would be a shortage of inventories. In a business, failing to keep up with the customer's demand is the biggest nightmare. Note: To find your inventory (classified as a current asset), all you need to check is your company’s Balance Sheet. You can find more about inventory management and inventory accounting. As we begin to learn about the Inventory Turnover Ratio, you will explore in detail what it has in store for you, so stay alert! It refers to the available stock of resources required in various stages of production. Inventory is the accounting of raw materials or components an organization uses to further produce goods or sell the raw materials. But before we move on, let’s understand what we mean by inventory. So, let’s learn more about Inventory Turnover Ratio and its benefits. Inventory turnover ratio is one of the most important ratios in the list of financial ratios that help you examine your financial health efficiently. The Inventory Turnover Ratio can help you track, optimize and manage resource consumption. Be it the manufacturing, selling, or restocking of goods. Moreover, when you are wheeling and dealing with a myriad of resources, it is essential to keep an account of everything. What you must also do is evaluate how often the resources are replaced. So, monitoring your company's revenue is not enough. The success of any business is marked by how efficiently and effectively the company resources are utilized.
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