What is inventory turnover rate?
Inventory turnover rate measures how often a business sells and replaces its inventory over a given period. It reflects how efficiently stock is managed.
How is inventory turnover calculated?
It is calculated by dividing cost of goods sold by average inventory for the period.
Why is inventory turnover important?
It indicates how quickly products are sold. A higher rate suggests strong demand and efficient stock management.
What does a low turnover rate indicate?
It suggests slow moving inventory, overstocking, or weak sales performance.
How do businesses improve inventory turnover?
They improve demand forecasting, optimise pricing, reduce excess stock, and align purchasing with sales trends.