Inventory Turnover Ratio

Measures how often a company’s inventory is sold and replaced over a period.

What it Measures ?

How fast we are selling and replacing inventory.

Relevant StakeHolders

Operations Manager, Finance Team

Why it Matters ?

Tracks inventory efficiency in production.

In-depth Use Case / Real-world Example

Inventory Turnover Ratio is calculated by dividing COGS by average inventory. If a company has ₹400,000 in COGS and an average inventory of ₹100,000, the ratio is 4. A higher ratio indicates efficient inventory management and strong sales. Companies with lower turnover may face excess inventory or weak sales.

Sample Formula