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# 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
```