What is Inventory Turnover?
Inventory turnover measures how many times a business sells and replaces its
stock during a specific period. A higher turnover indicates efficient inventory
management and strong sales performance.
Inventory Turnover Formula
$$\text{Inventory Turnover} = \frac{\text{Cost of Goods Sold (COGS)}}{\text{Average Inventory}}$$
Where Average Inventory is calculated as $(\text{Opening Inventory} + \text{Closing Inventory}) / 2$.
Why Inventory Turnover Matters?
- Identifies slow-moving stock: Helps spot items that aren't selling.
- Improves purchasing decisions: Prevents overstocking or stockouts.
- Reduces storage costs: Minimizes warehouse and insurance expenses.
- Enhances cash flow: Frees up capital tied in unsold goods.
You can also use our
CAGR Calculator and
Discount Calculator
for complete financial analysis.