Inventory Turnover Ratio

Accounting Dictionary

Inventory Turnover Ratio

The inventory ratio is computed by dividing Cost of Goods Sold by Average Inventory.

This is the ratio that tells how many times in a given period of time you sold your inventory and had to buy more. If you replaced your inventory 6 times in a year, that means you sold it faster than someone who replaced theirs only three times in a year.

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