How is the inventory turnover rate calculated?
Inventory Turnover Rate is a financial metric used to measure how efficiently a company manages its inventory. It indicates how many times a company's inventory is sold and replaced over a certain period, usually a year.
Terms and formula
- SKU: Stock Keeping Unit, a unique identifier for your product variants.
- Inventory turnover rate: how many times a company's inventory is sold and replaced over a certain period.
[Cost of Goods Sold] / [Average Inventory Value]
- Average inventory value: the average value of inventory during the period.
( [Begingin Inventory Value] + [Ending Inventory Value] ) / 2
- Units sold: how many units sold of products in a certain period.
- Average inventory quantity: the average quantity of inventory during the period.
( [Begingin Inventory Quantity] + [Ending Inventory Quantity] ) / 2
Updated on: 11/02/2025
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