Inventory turnover, or the inventory turnover ratio, measures the number of times a company is able to sell and replace its inventory within a specific time period. The formula for calculating the inventory turnover ratio is as follows:

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

A high inventory turnover is preferred because it indicates that the company is selling goods faster and spending less on holding the inventory, while a low inventory turnover ratio is a sign of weak sales and abundant inventories for a business.

Reviews Add a review
No reviews yet

More From Corporate Finance Institute®

Browse our top rated business templates. See All
REIT Financial Model Template
This REIT financial model template acts as a guideline for modeling a real estate investment trust (REIT). This model will…
Energy Industry Comps Template Energy Industry Comps Template
This energy industry comps template provides a guideline and example of what a comparables universe would look like for a…
Financial Institution Dividend Discount Model
The financial institution dividend discount model uses future dividends to find the implied share price. This model is based on…
Loan Payment Calculator
The loan payment calculator allows users to determine the principal and interest payment each month until the full balance of…
DDM - Excel Dividend Discount Model Template
The dividend discount model template allows investors to value a company base on future dividend payments. This is based on…
Non-directional trading strategy template Non-directional Trading Strategies Template
The non-directional trading strategies template allow users to determine the profit when buying options. This template focuses on non-directional strategies…
See All