What does "inventory turnover" indicate?

Inventory turnover is a crucial metric in inventory management that indicates how efficiently a company sells and replaces its stock within a specific period. A higher inventory turnover ratio implies that a company is selling its products quickly and effectively managing its inventory levels, which can lead to reduced holding costs and increased cash flow. This metric helps businesses understand their sales performance and inventory management practices.

When businesses have high inventory turnover, it often suggests robust demand for their products and effective sales strategies, while low turnover may indicate overstocking or weak sales. Therefore, option B accurately captures the essence of what inventory turnover measures: the rate at which inventory is sold and replaced. This is vital for businesses to maintain optimal inventory levels and avoid issues like stockouts or excess inventory, ensuring a smoother operational flow.