Inventory Turnover Explained | Stock Efficiency, COGS & Average Inventory
This video provides a clear and practical explanation of inventory turnover, one of the most important financial and operational metrics for evaluating how efficiently a company manages its stock. Inventory turnover measures how many times a business sells and replaces its inventory within a given period—usually one year.
A higher inventory turnover ratio generally indicates strong demand, efficient stock movement, and minimal excess inventory. A lower turnover ratio may signal overstocking, weak sales, or inefficiencies within the supply chain.
The lecture explains the key formula used to calculate the inventory turnover ratio:
Inventory Turnover = Cost of Goods Sold (COGS) / Average Inventory
Real-world meanings, decision-making implications, and practical examples help illustrate how organisations use this metric to evaluate performance and improve inventory management.
This video is perfect for learners in supply chain management, operations, finance, retail planning, business analytics, and inventory optimisation.
What this video covers:
✔ What is inventory turnover?
✔ Why the ratio matters for efficiency
✔ Formula: COGS ÷ Average Inventory
✔ What high vs. low turnover indicates
✔ How businesses use turnover to improve stock decisions
✔ Examples from retail and manufacturing
✔ Link to cash flow, demand, and inventory strategy
This video explains the inventory turnover ratio—how often a company sells and replaces stock. It covers the formula (COGS ÷ average inventory), what high and low turnover indicate, and how the metric helps evaluate stock management efficiency.
Q: What is inventory turnover?
Inventory turnover measures how many times a company sells and replaces its inventory in a given period.
Q: How do you calculate the inventory turnover ratio?
Inventory Turnover = COGS / Average Inventory
Q: What does a high inventory turnover mean?
It indicates strong sales, efficient inventory movement, and lower carrying costs.
Q: What does a low inventory turnover indicate?
Possible overstocking, slow sales, or operational inefficiencies.
Q: Why is inventory turnover important?
It reflects demand, stock efficiency, cash flow performance, and overall supply chain health
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