Inventory Turnover = Cost of Goods Sold ÷ Average Inventory
Cost of Goods Sold = Beginning Inventory + Purchases – Ending Inventory
Average Inventory = (Beginning Inventory + Ending Inventory) ÷ 2
Use the same time period for all values
Divide COGS by Average Inventory to get the turnover ratio
Higher turnover means inventory is sold faster
Lower turnover means inventory is sold more slowly