What does inventory turnover measure?

Inventory turnover is a key metric that measures how often inventory is sold and replaced over a specific period, usually within a year. It reflects how effectively a company manages its inventory levels in relation to its sales performance. A higher turnover rate indicates that a company is selling goods quickly and efficiently restocking its inventory, which can signify strong sales and effective inventory management practices.

This metric is crucial for businesses as it helps to identify purchasing and production efficiency, influence profitability, and inform strategic decisions related to inventory levels, storage space, and cash flow management. By analyzing inventory turnover, companies can better understand consumer demand and streamline operations to reduce holding costs associated with excess inventory while ensuring that they meet customer needs promptly.

Therefore, option C accurately captures the essence of what inventory turnover measures.