What is the formula for the inventory turnover ratio?

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Accepted Answer

Inventory turn ratio is a financial metric that measures how many times a company's inventory is sold and replaced over a period of time.

It is calculated by dividing the cost of goods sold by the average inventory value.
A high inventory turn ratio indicates efficient inventory management and sales, while a low ratio may indicate overstocking or poor sales.
It is important for demand planners to monitor inventory turn ratio to ensure optimal inventory levels and avoid stockouts or excess inventory.
For example, if a company has $1 million in cost of goods sold and an average inventory value of $250,000, the inventory turn ratio would be 4.

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