inventory turnover ratio

inventory turnover ratio The inventory turnover ratio is a key financial metric used to assess how efficiently a company is managing its inventory. It is calculated by dividing the cost of goods sold (COGS) by the average inventory for a specific period. A higher ratio suggests that inventory is selling quickly, indicating strong demand and effective inventory management. A lower ratio may indicate overstocking or slow sales. Understanding this ratio helps businesses optimize their inventory levels to meet customer demand without overinvesting in stock.