inventory turnover

Popular Terms
Number of times a firm's investment in inventory is recouped during an accounting period. Normally a high number indicates a greater sales efficiency and a lower risk of loss through un-saleable stock. However, an inventory turnover that is out of proportion to industry norms may suggest losses due to shortages, and poor customer-service. The preferred method of computing inventory turnover is to compare the cost of sales (also called Cost Of Goods Sold or COGS) to average inventory (Cost of sales ÷ Average inventory). Another method, which compares net sales revenue to the inventory (Net sales revenue ÷ Inventory) is also used but it introduces the distortion of sales markup that is not documented in the inventory records.
Also called inventory turns or stock turnover.

Use 'inventory turnover' in a Sentence

I saw that our inventory turnover was good and that made me relived because I was worried about if for a bit.
16 people found this helpful
When you have a high inventory turnover you need to make sure that your factory can put out enough of your product.
14 people found this helpful
If you have a high inventory turnover that is very likely a good thing because it means your products are flying off the shelves.
14 people found this helpful




Email Print Embed