![]() This is a guide to the Inventory Turnover Ratio. Overall, ITR is a useful method to evaluate how well the inventory is being managed by a company and what it could do better in this area to improve its profitability. The number of units can’t be manipulated as can the monetary value be and therefore, this would give a more accurate ITR which is comparison ready. To resolve the flaw arising due to the inventory assumption, some companies use the number of units method to calculate the ITR instead of the monetary value of the same. Therefore ITR in isolation doesn’t tell as much as it is advocated in the financial analysis industry A deeper look into the notes of the same is required because two companies may use a different inventory assumption so both need to be brought on the same page before comparing.
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