Accounting
Intermediate

Inventory Turnover

How many times inventory is sold and replaced over a period.

Formula

IT=COGSAverage InventoryIT = \dfrac{COGS}{Average\ Inventory}

Variables

ITInventory turnover
COGSCost of goods sold
Average InventoryMean stock level

Example

COGS $600k / avg inventory $100k = 6×

Did You Know?

Dividing 365 by the turnover gives “days inventory outstanding” — the average shelf time of stock.

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