Inventory Turnover

Definition

How many times a company sells and replaces its inventory during a period. High turnover is usually good (products sell fast), unless it's so high that you're constantly out of stock.

Example Usage

The retail store's inventory turnover of 12x annually meant each product sold completely and was replaced 12 times per year.

Origin

Essential metric in retail and manufacturing financial analysis

Fun Fact

Grocery stores have high inventory turnover (perishables), luxury goods have low turnover (items sit longer)

Source: Operational Finance Standards

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Advanced

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