Certified Supply Chain Professional (CSCP) Practice Exam

Which performance metric measures the efficiency of inventory turnover?

1. Inventory to sales ratio

2. Days in inventory

3. Gross profit margin

4. Net profit margin

The correct answer is: Days in inventory

The performance metric that measures the efficiency of inventory turnover is days in inventory. This metric quantifies the average number of days that inventory is held before it is sold or used in production. A lower value for days in inventory indicates a faster turnover rate, which suggests that the company is efficiently managing its inventory, reducing holding costs, and quickly converting goods to cash. Conversely, a higher number of days in inventory may indicate overstocking, slow sales, or inefficiencies in the inventory management process. While other choices relate to financial performance, they do not specifically measure inventory turnover efficiency. The inventory to sales ratio provides insight into the relationship between inventory levels and sales but does not directly indicate how quickly inventory is turning over. Gross profit margin and net profit margin focus on profitability rather than inventory efficiency. Thus, days in inventory is the most relevant metric for assessing inventory turnover efficiency within supply chain management.