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Definition of Inventory Turnover Ratio

Definition: What is Inventory Turnover Ratio?

Inventory Turnover Ratio is the efficiency ratio which is comparing the cost of goods sold (COGS) with average inventory for a period to measure that, how effectively the inventory is managed. This ratio shows, how many times inventory turned or sold during the period.

Definition of Inventory Turnover Ratio

There are two main components of inventory turnover ratio which are stock purchasing and sales. Investors use this ratio to measure the inventory liquidity of the company.

Inventory is the most important part of the company. If the company can’t be sold the inventory then the inventory of the company may be worthless.

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