What does a high inventory turnover indicate about inventory usage?

• A. The inventory is used frequently and turns over quickly.
• B. The inventory is rarely used.
• C. COGS is low relative to average inventory.
• D. It measures supplier delivery times.

Answer: (A)

High inventory turnover means inventory is used frequently and moves out quickly. It reflects how often you replace your stock in a given period, driven by strong demand and efficient purchasing and usage. The turnover ratio is calculated by dividing cost of goods sold by average inventory; a high ratio shows that COGS is large relative to the amount of inventory kept on hand, signaling rapid usage and sales.

This has practical implications in a kitchen: you’re serving popular items and replenishing stock often, which can reduce carrying costs and spoilage risk. However, very high turnover can also point to understocking, risking stockouts if you don’t have enough on hand.

Why the other ideas don’t fit: if inventory is rarely used, turnover would be low, not high. If COGS is low relative to average inventory, turnover would likewise be low. Turnover isn’t a measure of supplier delivery times; it focuses on how quickly inventory is consumed and replaced.