Inventory Turnover

The Inventory Turnover is a financial ratio that provides information about a company’s efficiency in using its assets. These ratios are sometimes referred to as asset utilization ratios. Asset utilization ratios are intended to describe how efficiently or intensively a company uses its assets to generate sales. The inventory turnover equation is: Cost of goods sold (COGS) divided by inventory. The higher this ratio, the more efficiently the inventory is being managed.

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

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