A ratio that measures how many times a company's inventory is sold and replaced over a specific period, indicating sales efficiency and inventory management.
Inventory turnover shows how quickly a company converts its inventory into sales. A high ratio indicates strong sales and efficient inventory management. A low ratio may suggest overstocking, obsolete inventory, or weak sales. The ideal ratio varies by industry — grocery stores may turn inventory 12+ times per year, while jewelry stores may only turn it 1–2 times.
A retailer has annual COGS of ₹24,00,000 and average inventory of ₹4,00,000. Inventory Turnover = 6, meaning inventory is sold and restocked 6 times per year (about every 2 months).
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It depends on industry. Grocery/FMCG: 12–20. Apparel: 4–6. Electronics: 5–8. Furniture: 3–5. Compare against your industry peers, not generic benchmarks.
Higher turnover means less cash is tied up in unsold inventory. Each 'turn' converts inventory into sales revenue (and eventually cash), improving the cash conversion cycle.
The direct costs attributable to the production or purchase of goods sold by a company during a specific period.
The inventory level at which a new purchase order should be placed to replenish stock before it runs out, accounting for lead time and demand.
A unique alphanumeric code assigned to each distinct product or variant in inventory, used for tracking, ordering, and managing stock levels.
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