inventory turnover
Definition
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.
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Related terms:
inventory turns
'inventory turnover' appears in the definitions of these other terms on BusinessDictionary.com:
activity ratios, inventory analysis, inventory turns, stock turnover, turnover ratios
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