Inventory Turnover Ratio - Meaning, Formula, Calculation & Interpretations

This tutorial provides a comprehensive overview of the Inventory Turnover ratio, including its meaning, formula, calculations, and interpretation. Using a practical colgate case study example, we will learn how to calculate this inventory turnover ratio in excel.
You can download the Colgate Inventory Turnover Ratio template from this link - www.wallstreet...
What is Inventory Turnover Ratio?
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The Inventory Turnover Ratio examines how quickly a company replaces its current inventory and converts it into sales. A higher ratio means the company's product is in high demand and sells quickly, resulting in fewer inventory management costs and more profits.
Formula
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Inventory Turnover Ratio Formula = Cost of Goods Sold / Average Inventory
Interpretation of Inventory Turnover Ratio
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- High Inventory Turnover Ratio - This indicates that the company has done a good job of managing its inventory, with lower holding costs and fewer risks of obsolescence.
- Low Inventory Turnover Ratio - This implies that the company's products aren't frequently sold in the market, and its inventory becomes slow-moving, resulting in higher inventory costs and lower earnings.
For more details, you can refer to our article - www.wallstreet...
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[@jyotikrupashankarsingh2582]

Your interpretation of the Inventory turnover ratio was very comprehensive. Also, the Colgate case study was very easy to understand.

[@wallstreetmojo]

Thank you!

[@wallstreetmojo]

Download the Colgate inventory turnover ratio excel template used in this video from this link - www.wallstreetmojo.com/ratio-analysis-template/

[@preciouselebua2737]

Just found this video and it helped me understand better with industry analysis.

[@NS_Kat]

Thank you.

[@wallstreetmojo]

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[@teresadcruz4573]

Nice and interesting video. Great explanation with step by step example.

[@wallstreetmojo]

Many thanks!

[@ashmitjacob4659]

Very informative tutorial.Thank you.

[@wallstreetmojo]

You are welcome!

[@narayanbista490]

Amazing video with detailed information to it.

[@kuntalmukhopadhyay879]

I come from science background. But it are very easy to understand. Thank you very much sir. Please post a video on Free Cash flow and how to calculate reinvestment ratio, ROCE

[@user-id4ec7qv4b]

So, beg Inventory and end inventory are just blips in time measurements?
And the average of the inventory is a measure of cost value or retail value?
Thanks, nice video.

[@anaybagchi7682]

very interesting video

[@wallstreetmojo]

Glad you liked it

[@ankushkayshap5611]

Please help
Inventory turnover ratio = Cogs/ Avg Inventory , how this formula derived and comes to conclusion company efficiently sells its inventory.

[@varunbhaktha2424]

Good 👍

[@wallstreetmojo]

Appreciate your feedback, more content coming soon!

[@alanlukowiecki3422]

can inventory turnover be measured in weeks?

[@mohamedgamal9903]

great video really ... but for sorry I can't download the file .. i put my email and press download but the download didn't start

[@naveensoni4178]

Nice explanations