What is the meaning of Inventory Turnover?

Inventory Turnover is a financial metric used to show how many times the inventory of a company is turned into goods, sold and repurchased over a given period. This is useful as a low value of inventory turnover represents poor sales or inefficient manufacturing or excessive inventory held, whilst a high value can mean either strong sales or holding too little inventory.

The calculation for inventory turnover is:

• Cost of Goods Sold / Average Inventory