The inventory turnover ratio can be intuitively interpreted

The inventory turnover ratio can be intuitively interpreted as \"For every dollar of inventory the firm generates XXXX dollars of profit.\" true or false?

Solution

False.

Inventory turnover ratio is an efficiency ratio,which shows how many times the average inventory has been sold by the company.

inventory turnover ratio = cost of goods sold / average inventory

The amount of profit may not be known , merely by looking at the inventory turnover ratio.