Inventory Turnover Ratio

Inventory Turnover Ratio

Formula to calculate inventory turnover ratio:

Inventory Turnover Ratio = cost of goods sold / average inventory.



Inventory turnover ratio definition and explanation:


The inventory turnover ratio measures the number of times a company sells its inventory during the year.



A high inventory turnover ratio indicated that the product is selling well.



The inventory turnover ratio should be done by inventory categories or by individual product.