What Is Stock Turnover?

What Is Stock Turnover?

In business finance, stock turnover refers to the number of times a company sells its goods and then replaces the supply in a given period, such as one year. That number is arrived at by using a ratio in which the cost of goods sold, or COGS, is divided by the average inventory.

Stock turnover is more commonly known as inventory turnover. Companies want to avoid low cost turnover because it's generally a sign of poor inventory management that reflects overspending and a lack of sales efficiency. This incurs a higher risk of loss as goods sit in the warehouse losing potential value.