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Profit Percentage and Inventory Turnover

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An acquaintance with an interest in investing says "I would not invest in Company A because their gross profit percentage is low and their inventory turnover ratio is high." Is your acquaintance correct in their concerns? Reply to your acquaintance.

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This solution discusses low gross profit percentages and high inventory turnover rates.

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I would respond by saying that he/she has it a bit backwards. You want to invest in companies that have a high inventory turnover. A high inventory turnover means that the company turned over (or went through) their inventory X number of times throughout the year. This shows that the company is buying products, selling them, moving them out, and then needs to buy additional ...

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