Business Ratios Interview Question:

Why inventory turnover is important?

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Inventory turnover is important because a company often has a significant amount of money tied up in its inventory. If the items in inventory do not get sold, the company's money will not become available to pay its employees, suppliers, lenders, etc.

It is also possible that a company's inventory will become less in demand, perhaps become obsolete, or even deteriorate. If that occurs some of the company's money will be lost. Having slow-moving items in inventory also uses valuable space and makes the warehouse less efficient.
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