What does a high inventory turnover ratio indicate about a company’s inventory management?

Inventory turnover measures how many times a company sells and replaces its inventory during a given period. A high inventory turnover ratio generally indicates that inventory is being sold quickly and efficiently, minimizing holding costs such as storage, insurance, and obsolescence. From a financial management perspective, efficient inventory management improves cash flow by reducing capital tied up in unsold goods and shortens the cash conversion cycle. While an extremely high turnover could signal stockouts or lost sales, financial management texts typically interpret higher turnover—relative to industry norms—as a positive indicator of operational efficiency. Option B correctly reflects this standard interpretation.