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Definition

Inventory turnover rate

Inventory turnover rate (also called stock turn rate for resellers) is the number of times an inventory turns over or is sold during a specified time period (often one year). This rate tells how quickly a business is moving inventory through the organization. Higher rates indicate that lower investments in inventory are made, thus freeing up funds for other investments. It may e computed on a cost, selling price, or unit basis. The formula based on cost is:

        Inventory turnover rate = Cost of goods sold ÷ Average inventory at cost

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