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