Inventory turnover rate measures how frequently inventory is sold and replaced within a given period. It is a key metric of inventory efficiency and operational performance. Higher turnover rates indicate effective inventory management, while low turnover may suggest overstocking or slow-moving goods.
Characteristics:
- Reflects efficiency of stock usage
- Identifies slow-moving or obsolete items
- Influences storage costs and cash flow
- Calculated as cost of goods sold divided by average inventory
