The inventory turnover ratio the ratio of the cost of goods sold to the average stock held. It is often used to measure the efficiency of warehouse or stock control processes to meet demand. You can use the formula to calculate how many days it will take to sell the inventory you hold. Inventory turnover ratio (also known as stock turn) is an accounting and inventory management KPI used to measure how often stock is sold (used or replaced) within a fixed period, relative to its costs of goods sold (COGS). However, inventory turnover is likely to fluctuate depending on changes in demand, supply chain disruption and other market factors. Higher inventory turnovers can highlight strong sales and good inventory stocking policies. Low inventory turnovers can indicate poor sales or excess inventory. It can help improve decision-making regarding pricing, manufacturing, marketing and purchasing. Inventory turnover (also known as stock turnover) measures how well a business manages its inventory to meet demand. You can track this using inventory turnover – the time it takes from bringing an item into stock to selling it. Most of your stock will be somewhere in the middle. Some will fly out of the door as soon as you get stock, while others that are slow-moving will sit on the shelves until you have to give them away or write them off. Different products sell at different rates.
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