Inventory Turnover Ratio

Inventory turnover ratio is a sales metric that evaluates the number of times a brand has turned over stock in a particular time period.

What Is Inventory Turnover Ratio?

Inventory turnover ratio is a key performance metric that assesses a brand's sales productivity. To calculate this metric, brands would divide the cost of goods sold by the average product or inventory value within a given time period, typically a quarter or fiscal year. A low inventory turnover ratio can indicate poor sales performance during that time period, while a high ratio can be an indicator of success, showing that the brand moved inventory quickly and often during that period. However, inventory turnover ratio benchmarks vary by product, brand, and industry, as some types of products move more quickly than others.

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