Which of the following is the most appropriate regarding Inventory turnover? Inventory turnover increases as average inventory decreases, while other things remain the same. Inventory turnover is an efficiency measure. Inventory turnover is unaffected by changes in annual sales.

Inventory turnover is an efficiency measure of how a company manages its inventory in relation to its cost of goods sold (COGS). It basically measures how fast inventory is replaced over a given period of time. A higher inventory turnover ratio means either of the following; strong sales or insufficient inventory. The formula is as follows;

Inventory turnover = Cost of goods sold / average inventory