What inventory turnover is measuring
Inventory turnover shows how many times average inventory is effectively sold through cost of goods sold over a year. Higher turnover generally means inventory is moving faster, while lower turnover can suggest excess stock, weak demand, slower replenishment, or an intentionally deeper inventory position.
The ratio is most useful when it is read alongside days on hand. A 4.0x turnover means average inventory sits for about 91 days, which is often easier to interpret operationally than the multiple alone.
