Quick Definition

Inventory Turnover is a financial ratio that measures how often a company sells and replaces its stock of goods during a specific period.

Formula

Examples

• 1A retail clothing store that sells and restocks its inventory completely four times a year has an inventory turnover ratio of 4.
• 2A car dealership that sells and replaces its inventory twice a year has an inventory turnover ratio of 2.
• 3A grocery store with high inventory turnover may replace its stock weekly, indicating efficient management and high demand for its products.

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