inventory turns ratio

inventory turns ratio is a key metric used in supply chain and retail management to measure how often inventory is sold and replaced within a specific time frame. A higher inventory turns ratio typically indicates strong sales and efficient inventory management, while a lower ratio could signal overstocking or slow-moving goods. When users search for “inventory turns ratio,” they often want to understand how to calculate it—by dividing the cost of goods sold (COGS) by the average inventory during a period. This ratio helps businesses assess liquidity, optimize purchasing decisions, and reduce holding costs. It also influences cash flow and profitability. For industries like fashion or electronics, where items depreciate quickly, maintaining a healthy inventory turnover is crucial. Tools like ERP systems or inventory management software can automatically calculate and report this ratio. By monitoring it regularly, businesses can forecast demand more accurately, adjust reorder points, and ensure they’re not tying up capital in unsold stock.