what is inventory turnover

what is inventory turnover refers to a 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 during a given period. A higher inventory turnover rate indicates that a business is selling and restocking products more frequently, which can be a sign of efficient inventory management and strong sales. On the other hand, a low inventory turnover rate suggests that a company may be overstocked, facing slow sales, or struggling to move products. Monitoring inventory turnover is critical for businesses to optimize their stock levels, reduce storage costs, and improve cash flow.