inventory turnover ratio meaning

inventory turnover ratio meaning is a financial metric used to measure how quickly a company sells and replaces its inventory over a period of time. It is calculated by dividing the cost of goods sold (COGS) by the average inventory for the period. A high inventory turnover ratio indicates that a company is selling its products quickly, which is generally seen as a positive sign. A low ratio might suggest that the company is overstocked or struggling to sell its inventory efficiently, potentially leading to increased storage costs and decreased profitability.