Inventory Turnover Ratio or Stock Turnover Ratio
Every firm has to keep a certain level of inventory of finished goods so as to be capable to meet the requirements of the business. Though, the level of inventory should neither be too much high nor too much low.
The meaning of, too high inventory is higher carrying costs and higher risk of stocks becoming obsolete whereas too low inventory may mean the loss of business opportunities. It is very necessary to keep sufficient stock in business.