Inventory Turnover Ratio

Inventory turnover divides cost of goods sold by average inventory, showing how many times inventory cycles through over a period. A turnover of 8 means inventory is fully sold and replenished roughly eight times a year.

Higher turnover generally means less capital sitting idle in unsold stock and fresher inventory, though extremely high turnover in some categories can also signal understocking and lost sales from running out too often — it's a balance, not a number to maximize without limit.