What is Inv Turn?
Measures how many times a company sells and replaces its inventory during a period.
Think of it like this
Like how many times a grocery store empties and refills its shelves - faster is usually better.
Formula
Inventory Turnover = COGS ÷ Average Inventory- COGS: Cost of Goods Sold
- Average Inventory: (Beginning + Ending Inventory) ÷ 2
Why it matters
- Shows inventory management efficiency
- High turnover = less capital tied up
- Low turnover may indicate obsolete inventory
- Critical for retail and manufacturing
What's a good value?
< 4x
Low
Slow-moving inventory, potential problems
4-8x
Average
Normal for many industries
8-12x
Good
Efficient inventory management
> 12x
Excellent
Very fast turnover (groceries, fast fashion)
Real-world example
A clothing retailer with declining turnover may have style/sizing issues or overbuying.
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