Use of the inventory turnover measurement

Without visiting a company or investigating how it conducts its business and what efforts it uses to control its inventories, we have a technique to measure its effectiveness. This technique involves calculating the inventory turnover ratio (turns) and comparing it to turns achieved by similar companies. Once we have determined that there are apparent opportunities for inventory reduction, the next step is to analyze what can be done to effect that reduction. But that's the topic of another lesson.