What is 'Inventory Turnover'?

Inventory turnover measures a company's efficiency in managing its stock of goods. The ratio divides the cost of goods sold by the average inventory. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

Term of the Day | Words to Know Inventory Turnover Inventory turnover is a ratio showing how many times a company has sold and replaced inventory during a given period. A company can then divide the days in the period by the inventory turnover formula to calculate the days it takes to sell the inventory on hand. Calculating inventory turnover can help businesses make better decisions on pricing, manufacturing, marketing and purchasing new inventory. Read More » Related to "Inventory Turnover" Measuring Company Efficiency To Maximize Profits Companies stay efficient and competitive by keeping inventory levels down and speeding up collection of the moneys they're owed. Read More » How to Calculate the Inventory Turnover Ratio The inventory turnover ratio is a key measure for evaluating how effective a company is at managing inventory levels and generating sales from it. Read More » Inventory Valuation — LIFO vs. FIFO We describe how to calculate the inventory item on the balance sheet using FIFO, LIFO, and average cost methods, and consider the results of each. Read More » Related Definitions Inventory Reserve An inventory reserve is a contra asset account on a company's balance sheet made in anticipation of inventory that will not be able to be sold. Read More » Holding Costs Holding costs associated with storing inventory are a major component of supply chain management because businesses must determine how much to keep in stock. Read More » Cost of Goods Sold Cost of goods sold (COGS) is defined as the direct costs attributable to the production of the goods sold in a company. Read More » Fast-Moving Consumer Goods Fast-moving consumer goods are cheaper products that sell quickly such as milk, gum, fruit and vegetables, soda, beer, and common drugs like aspirin. Read More » CONNECT WITH INVESTOPEDIA Email sent to: mondemand.forex@blogger.com To update your newsletter preferences or unsubscribe, click here. 114 West 41st St, floor 8 New York NY 10036 © 2020, Investopedia, LLC, All Rights Reserved | Privacy Policy