Inventory Turnover Ratio: Definition, Meaning & Guide for Indian Businesses

Inventory turnover = COGS ÷ average inventory. Tells you how many times you sold and replaced inventory in a period. Higher = healthier cash flow.

What is Inventory Turnover Ratio?

Inventory turnover ratio measures inventory efficiency. Formula: COGS ÷ ((opening + closing inventory) / 2). Example: COGS ₹1 crore, average inventory ₹25 lakh = turnover of 4 (inventory cycles 4x/year). Higher turnover = less cash tied up in stock, less risk of obsolescence. Industry benchmarks: groceries 12-15x, electronics 4-6x, apparel 4-8x, jewellery 1-2x. Low turnover means slow-moving stock; reduce by clearing dead stock (markdowns), better demand forecasting, JIT supplier relationships.