Learn / Fundamentals / Financial health / Inventory Turnover
Inventory Turnover = COGS ÷ Average Inventory
Inventory turnover counts how many times a year the company sells through its average stock pile. High usually means fresher goods and less cash trapped on shelves. Too low can mean stale inventory. Too high can mean empty shelves.
01 Feel it first
Pick retail fast, manufacturer, or luxury slow, or slide COGS and inventory. Watch turns and approximate days on shelf.
02 Break the intuition
Company A runs shelves at 8× turnover. Reveal what happens when speed leaves no safety stock.
03 Race it
Company A and Company B hold similar inventory. Hit Race and see how many times each sells through in a year.
Hit Race to compare the lanes side by side.
04 Scrub the scale
Drag the turnover slider. The same multiple can look stale, normal, or dangerously fast depending on context.
A luxury jeweler at 0.8× and a grocer at 10× can both be normal for their peer group. Always compare inside the same kind of business.
05 Two flavors
Turnover and days inventory are the same story flipped. One counts turns per year. The other counts days sitting on the shelf.
06 The catch
Grocers run hot. Luxury and heavy manufacturing run slow. Always compare within peers.
07 Check yourself
08 Where it breaks
Accounting method shifts cost of goods sold. Turnover can move without any real change in how fast goods sell.
Retailers stock up before holidays. Year-end inventory can look bloated or thin depending on timing.
Shelves running too lean lose sales when demand spikes or supply hiccups. Speed is not free.
One division selling perishables and another selling spare parts blend into one turnover number that hides both stories.
Open any ticker for efficiency context, then screen peers by how fast they move goods off the shelf.
At $400 of COGS on $50 of average inventory, turnover is 8.0×. Goods sit about 46 days before selling through. Fast retail runs hot. Luxury and heavy manufacturing often run slow.