What does inventory turnover measure?

What does inventory turnover measure?

• A. Average inventory
• B. Cost of food sold
• C. Days in period
• D. Measures how quickly an item in storage is used

Answer: (D)

Inventory turnover measures how quickly inventory is used or sold over a period. It’s calculated by dividing the cost of goods sold by the average inventory on hand during that time. In foodservice, this shows how efficiently you’re turning stock into meals and revenue. A higher turnover means items move quickly, reducing waste and holding costs; a lower turnover signals slow-moving stock and potential spoilage or cash tied up in inventory. It’s not simply the level of average inventory, or the cost of food sold by itself, or a time-frame measure—it's the rate at which inventory is consumed or replaced. For example, if COGS is $300,000 and average inventory is $60,000, turnover is 5, meaning the inventory cycles five times per year.

Inventory turnover measures how quickly inventory is used or sold over a period. It’s calculated by dividing the cost of goods sold by the average inventory on hand during that time. In foodservice, this shows how efficiently you’re turning stock into meals and revenue. A higher turnover means items move quickly, reducing waste and holding costs; a lower turnover signals slow-moving stock and potential spoilage or cash tied up in inventory. It’s not simply the level of average inventory, or the cost of food sold by itself, or a time-frame measure—it's the rate at which inventory is consumed or replaced. For example, if COGS is $300,000 and average inventory is $60,000, turnover is 5, meaning the inventory cycles five times per year.