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Definition

Inventory turnover

Inventory turnover is a ratio that measures the number of times on average the inventory is sold during the period. Its purpose is to measure the liquidity of the inventory. The inventory turnover is computed by dividing cost of goods sold by the average inventory during the period. Unless seasonal factors are significant, average inventory can be computed from the beginning and ending inventory balances.

    Inventory Turnover = Cost of Goods Sold ÷ Average Inventory


Inventory turnover is a calculation of the number of times a firm sold and replaced (or turned over) its average stock of goods during an accounting period. (Found by dividing the cost of goods sold by the average inventory.)

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