What is Inventory Turnover?
Cfefinances
Inventory Turnover is calculated as Cost of Goods Sold divided by Average Inventory, where Average Inventory equals (Beginning Inventory + Ending Inventory) divided by 2. It measures how many times per year a company sells through its inventory. Higher turnover is generally better, but it should always be evaluated against industry peers.
Think about how many times a year a company sells through its stock. Divide cost of goods sold by average inventory — higher generally beats lower, versus peers.