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Inventory Turnover (Sales Turnover) Ratio - Explained

What is Inventory Turnover?

Written by Jason Gordon

Updated at April 7th, 2022

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Table of Contents

What is Inventory Turnover?How to calculate Inventory Turnover?What is the Average Sales Period?

What is the Inventory Turnover Ratio?

Inventory turnover, also known as Sales Turnover, is a metric representing the rate at which a company sells its inventory and replaces it in a given period. 

Inventory Turnover Ratio = COGS / Average Inventory

This metric is calculated by dividing the number of goods or cost of goods sold by the average inventory. An inventory turnover ratio helps companies make sales and production decisions that will further enhance profitability and customers satisfaction.

Back to: Accounting & Taxation

How to calculate Inventory Turnover?

There are multiple ways to calculate the inventory turnover of a company. The cost of goods sold (COGS) can be divided by the average inventory. 

Inventory turnover can also be calculated as sales divided by average inventory. The average inventory is calculated by adding the beginning inventory to the ending inventory and divide by 2; (beginning inventory + ending inventory)/2. 

What is the Average Sales Period?

Average sale period = 365 days/Inventory turnover ratio

Indicates how many days it takes on average to sell the company’s inventory.

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  • Common-Size Analysis (Vertical Analysis) of Financial Statements
  • Common-Size Financial Statement
  • Net Dollar Retention
  • Horizontal Analysis
  • Per Share Basis
  • Profitability Ratios
  • Gross Margin Ratio
  • Profit Margin
  • After Tax Profit Margin
  • Return on Assets
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  • Diluted Earnings Per Share
  • Asset Turnover Ratio
  • Berry Ratio
  • Break-Even Analysis
  • Liquidity Ratio
  • Current ratio  (Working Capital Ratio)
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  • Quick Assets
  • Days Sales Outstanding
  • Cash Ratio (Operating Cash Flow Ratio)
  • Receivables turnover ratio (often converted to average collection period)
  • Accounts Payable Turnover Ratio
  • Inventory turnover ratio (often converted to average sale period)
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  • Leverage Ratio (Debt Ratio)
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  • Debt to Equity
  • Debt to Income Ratio
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  • Non-financial Performance Measures: The Balance Scorecard


inventory turnover inventory turn over average sales period turnover ratio

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