What is Inventory turnover?
Inventory turnover shows how often average inventory is sold and replaced during a period. Low turnover can signal overstock or slow assortment. Extremely high turnover may indicate insufficient buffers and stockout risk.
Formula
Inventory turnover = cost of goods sold ÷ average inventory
Practical example
With 2.4 million euros cost of goods sold and 600,000 euros average inventory, turnover equals 4.
What teams should remember
- Inventory turnover shows how often average inventory is sold and replaced during a period.
- Low turnover can signal overstock or slow assortment. Extremely high turnover may indicate insufficient buffers and stockout risk.