Certified Supply Chain Professional (CSCP) Practice Exam

Inventory turnover indicates what?

1. The speed at which products are delivered to customers

2. The number of times inventory cycles during the year

3. The overall value of inventory on hand

4. The rate of return on unsold goods

The correct answer is: The number of times inventory cycles during the year

Inventory turnover is a key performance indicator that reflects how efficiently a company manages its inventory. The correct choice highlights that this metric indicates the number of times inventory cycles through the business over a specific period, typically measured annually. A higher inventory turnover ratio signifies that a company is selling its products quickly and replenishing its inventory efficiently, indicating strong sales and effective inventory management. Understanding inventory turnover is crucial for supply chain professionals as it directly influences cash flow, storage costs, and overall operational efficiency. A well-managed inventory turnover helps in minimizing excess stock and reducing the risk of obsolescence, thus optimizing the supply chain process. The other options, while related to inventory management, do not accurately reflect the specific definition of inventory turnover. For instance, the speed of product delivery deals more with logistics and fulfillment rather than stock management. Similarly, the overall value of inventory is a separate financial measure that focuses on the valuation at a specific time, rather than how frequently products are sold and restocked. The rate of return on unsold goods focuses on the profitability of products that did not sell, which is also a different concern from turnover measurement.