Inventory Turnover is a measure of how quickly a company sells and replaces its goods. A high inventory turnover is usually an indication of high sales volume. However, a high inventory turnover could also be due to large discounts on goods. A company’s inventory turnover is usually compared against the sector’s average value in order to determine where a company stands in relation to similar companies in the sector.
Inventory Turnover = COGS ÷ Inventory