Inventory turnover quantifies the frequency of sales and replacements of inventory over a given time frame, usually a year. The computation involves dividing the average inventory value by the cost of goods sold (COGS). While a low turnover rate points to overstocking or poor sales, a high turnover rate denotes effective inventory management, robust sales, and low holding costs. Businesses can find slow-moving items, optimize purchases, and match stock levels with real demand patterns by keeping an eye on inventory turnover.
