Explanation of Inventory to Sales:

The Inventory to Sales ratio measures the percentage of inventory the company currently has on hand to support the current amount of sales. 

Importance of Inventory to Sales:

An increasing Inventory to Sales ratio is generally a negative sign, showing the company may be having trouble keeping inventory down and/or Net Sales have slowed, and can sometimes indicate larger financial problems the company may be facing.  Viewing this ratio over several periods reveals the important aspect of the company's ability to manage inventory while attempting to increase sales.  It is also important to compare this ratio among several companies to gauge how well each one performs, and to compare their ratios to industry averages.