Inventory turnover

What is an Inventory turnover?

Inventory turnover counts as Cost of goods sold divided by the average of Total inventories over the past two periods. It is not calculated for banks.

Formula:

Cost of goods sold / Total inventories

What does Inventory turnover mean?

It shows how quickly a company sells its stock. A low turnover can mean weak sales, while a high one can mean good sales or insufficient stock. Inventory turnover is an important indicator of a company's performance.