inventory turnover


The ratio of a company's annual sales to its inventory; or equivalently, the fraction of a year that an average item remains in inventory. Low turnover is a sign of inefficiency, since inventory usually has a rate of return of zero. For instance, if a company was able to generate $10 million in sales but averaged $5 million in inventory, the inventory turnover would be 10 million / 5 million = 2. This number indicates that there would be 2 inventory turns per year, meaning that it would take 6 months to sell all the inventory.

Use inventory turnover in a sentence

The automobile industry has a much lower inventory turnover than the food industry because it takes much longer to sell a car than it does to sell food.

​ Was this Helpful? YES  NO 14 people found this helpful.

You should always strive to have very high inventory turnover so that you know you are moving a lot of products.

​ Was this Helpful? YES  NO 11 people found this helpful.

In order to reach their financial projections, the company needed an inventory turnover rate of at least 10 for the year.

​ Was this Helpful? YES  NO 4 people found this helpful.

Show more usage examples...

Related Terms

Browse Definitions by Letter: # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
inventory lien inventory turns