Which statement correctly distinguishes inventory turnover from days of supply?

Which statement correctly distinguishes inventory turnover from days of supply?

• A. Turnover represents the total yearly purchasing cost.
• B. Days of supply measures the average delivery lead time.
• C. Turnover measures how many times stock is sold and replaced over a period; days of supply estimates how long current stock will last at current consumption.
• D. Days of supply equals inventory turnover divided by demand.

Answer: (C)

The main idea being tested is how two inventory metrics relate but measure different things: turnover is a rate of how often stock is sold and replaced, while days of supply is a projection of how long current stock will last at the present consumption rate. Inventory turnover answers how many times stock is sold and replaced during a period. It reflects the speed of moving inventory relative to the stock on hand (often calculated as cost of goods sold divided by average inventory). Days of supply, on the other hand, estimates how long the current on-hand inventory will last if you keep buying or consuming at the current rate (it’s about duration, not frequency). So, the statement that correctly distinguishes them is that turnover measures the frequency of stock being sold and replenished, whereas days of supply estimates the time stock will last given current demand. A helpful note: these metrics relate inversely—higher turnover generally means a shorter days-of-supply figure because stock is being sold and replenished faster. The other options mischaracterize the concepts: turnover is not the total yearly purchasing cost; days of supply is not a measure of delivery lead time; and days of supply is not simply turnover divided by demand (the standard linkage is roughly days of supply ≈ 365 / turnover, depending on definitions).

The main idea being tested is how two inventory metrics relate but measure different things: turnover is a rate of how often stock is sold and replaced, while days of supply is a projection of how long current stock will last at the present consumption rate.

Inventory turnover answers how many times stock is sold and replaced during a period. It reflects the speed of moving inventory relative to the stock on hand (often calculated as cost of goods sold divided by average inventory). Days of supply, on the other hand, estimates how long the current on-hand inventory will last if you keep buying or consuming at the current rate (it’s about duration, not frequency).

So, the statement that correctly distinguishes them is that turnover measures the frequency of stock being sold and replenished, whereas days of supply estimates the time stock will last given current demand.

A helpful note: these metrics relate inversely—higher turnover generally means a shorter days-of-supply figure because stock is being sold and replenished faster. The other options mischaracterize the concepts: turnover is not the total yearly purchasing cost; days of supply is not a measure of delivery lead time; and days of supply is not simply turnover divided by demand (the standard linkage is roughly days of supply ≈ 365 / turnover, depending on definitions).