Question about inventory turnover

Assuming that the inventory balance for Quality Department Store at the beginning of 2008 was
$450,000, its inventory turnover and comparative data are as shown in the following Illustration.
Quality’s inventory turnover declined slightly in 2009.

This ratio indicates that the company turns over its inventory 2.3 times per year. On average, cash is
invested in inventory, goods and services are produced, and these goods and services are sold 2.3
times a year.

The turnover of 2.3 times is low compared with the industry average of 4.3 and J.C. Penney’s 3.1.
Generally, the faster the inventory turnover, the less cash a company has tied up in inventory and
the less the chance of inventory obsolescence.