Inventory Turnover Rate

Inventory turnover rate is a financial metric used to measure the efficiency of a company's inventory management. It shows how many times a company's inventory is sold and replaced within a specific period, typically a year. The formula for calculating the inventory turnover rate is: Inventory Turnover Rate = Cost of goods sold (COGS) / Average Inventory A high inventory turnover rate generally means that a company is selling its inventory quickly and efficiently. However, a very high turnover rate might also suggest the business isn't carrying enough inventory to meet customer demand, which could lead to stockouts and lost sales.