Inventory
Inventory turnover
How many times you sell through your average stock in a year.
Formula
COGS ÷ average inventory at cost
Turnover is cost of goods sold divided by average inventory at cost. A turnover of four means the shelf empties and refills roughly four times a year.
Higher is usually better, because the same capital earns margin more often, but pushed too far it becomes stockouts.
It is the inventory counterpart to margin: two stores with the same CM1 can have very different returns on the money they tie up.
Related terms