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Inventory turnover measures how many times a company sells and replaces its stock in a given period. A higher ratio means inventory is sold quickly; a lower ratio suggests slow-moving stock, potential obsolescence, or overstocking.

Trin-for-trin guide

1. 1Calculate COGS for the period (usually annual)
2. 2Calculate average inventory: (Opening + Closing inventory) / 2
3. 3Inventory turnover = COGS / Average inventory
4. 4Days inventory outstanding = 365 / Inventory turnover

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