The rate of stock turnover is a financial ratio that measures how quickly a company is selling its inventory or stock. It is calculated by dividing the cost of goods sold by the average stock during a given period.
The cost of goods sold represents the total cost of all the goods that a company has sold during a period, while the average stock is the average value of inventory held during the same period. By dividing the cost of goods sold by the average stock, we can determine how many times the company has sold and replaced its inventory during the period.
A high stock turnover ratio indicates that a company is efficiently managing its inventory and is selling its goods quickly. On the other hand, a low ratio indicates that a company may be holding too much inventory, which can lead to higher storage costs, obsolescence, and potentially lower profit margins.
Therefore, the correct option is "cost of goods sold over average stock".