Is your cash sitting on a shelf?

Inventory turnover measures how many times you sell and replace inventory over a period. It converts a static stock number into a signal about how efficiently cash is moving through your product line.

The formula, and the trap in it

Turnover = cost of goods sold ÷ average inventory. Average inventory (beginning plus ending, divided by two) smooths out a single snapshot, which matters because inventory taken right after a big restock looks very different from inventory taken right before one.

Turn it into days on hand

Days inventory on hand = period length ÷ turnover. A turnover of 6× over a 365-day year is roughly 61 days of stock. This number is easier to act on than a bare ratio, since 'you're holding two months of stock' is a clearer decision trigger than '6.08×'.

There is no universal 'good' number

Fast-moving consumer goods might turn 10-12× a year; furniture or made-to-order goods might turn 2-4× and still be healthy. Compare turnover against your own history and category peers, not a generic benchmark. A rising trend usually matters more than the absolute figure.

Too high has a downside too

Very high turnover paired with frequent stockouts suggests you are underbuying and losing sales, not managing efficiently. Pair turnover with a stockout or lost-sales metric before concluding that faster is always better.