Inventory Turnover (IT)
Number of times inventory is sold and replaced during a period
FORMULA
Inventory Turnover = Cost of Goods Sold / Average Inventory
Alternate Calculations
Using Revenue
Revenue / Average Inventory Value (with markup adjustment)What is Inventory Turnover?
Inventory Turnover measures how quickly a company sells and replaces its inventory. Higher turnover indicates efficient inventory management and strong demand. Lower turnover may suggest obsolete inventory or weak demand. Calculated by dividing cost of goods sold by average inventory.
Chart
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Sample Data
| month | cogs | inventory | turnover |
|---|---|---|---|
| Jan | 350,000 | 300,000 | 1.17 |
| Feb | 360,000 | 310,000 | 1.16 |
| Mar | 370,000 | 305,000 | 1.21 |
| Apr | 380,000 | 295,000 | 1.29 |
Required Data Columns
Cost of Goods SoldAverage Inventory