Inventory turnover, often called stock turn, shows how many times a business sells through its average stock over a period, usually a year. A higher figure means stock is moving quickly; a lower one means it is sitting.
It is commonly calculated by dividing cost of goods sold by average inventory value at cost. If annual cost of goods sold is $600,000 and average stock at cost is $150,000, the turnover is four. Days of stock can be found by dividing 365 by the turnover figure.
Retailers compare turnover by category, supplier and store to see which lines earn their space and which tie up cash. Hospitality venues track it for food and beverage, where fast turnover helps keep products fresh. What counts as good depends heavily on the industry: fresh food turns much faster than furniture or jewellery.
Pitfalls include comparing across very different categories, using retail price instead of cost, and chasing a high turn at the expense of availability. Too little stock leads to stock-outs and lost sales, while too much hurts cash flow and leads to markdowns.
Turnover is a simple measure that points to overstock and slow lines, and it helps guide buying, ordering and markdown decisions.