Inventory Turnover
Inventory turnover is how fast stock becomes cash again, the metric deciding how much business the balance sheet carries.
What inventory turnover is
Inventory turnover is how many times the stock sells through and gets replaced in a period: cost of goods sold divided by average inventory, the speed at which capital tied up in product becomes cash again.
Why inventory turnover matters
Inventory is money sleeping in a warehouse: turn it fast and the same capital funds several rounds of sales a year; turn it slowly and cash suffocates inside stock while storage costs tick and styles age. For inventory-heavy founders, turnover is the metric that decides how much business the balance sheet can carry.
Reading and improving turnover
- Compute it per category: the blended number hides the sleepers
- Pair with margin: fast-and-thin versus slow-and-rich are both viable, knowingly
- Raise it from both ends: better forecasts in, faster markdowns out
- Watch the trend: slowing turnover is cash flow trouble arriving early
Frequently asked questions
What’s a good inventory turnover for ecommerce?
Category-dependent by nature: fashion and consumables expect many turns a year, durable and luxury goods fewer. The usable benchmark is your own trajectory and your category’s norm, not a universal number.
Can turnover be too high?
Yes: chronic stockouts, panic reorders, and lost sales are the symptoms of stock run too lean. Turnover is optimized against availability, and safety stock is the deliberate brake.
Related terms
Inventory Management · Sell-Through Rate · Dead Stock · GMROI · SKU Rationalization