Inventory turnover

In accounting, the Inventory turnover is a measure of the number of times inventory is sold or used in a time period such as a year. The equation for inventory turnover equals the cost of goods sold or net sales divided by the average inventory. Inventory turnover is also known as inventory turns, merchandise turnover, stockturn, stock turns, turns, and stock turnover.

The formula for inventory turnover:

${\displaystyle {\mbox{Inventory Turnover}}={\frac {\mbox{Net Sales}}{\mbox{Average Inventory}}}}$

or

${\displaystyle {\mbox{Inventory Turnover}}={\frac {\mbox{Cost of Goods Sold}}{\mbox{Average Inventory}}}}$

or

The most basic formula for average inventory:

or just

Multiple data points, for example the average of the monthly averages, will provide a much more representative turn figure.

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