Inventory turnover measures how many times a company sells and replaces its inventory during a period. It divides cost of goods sold by average inventory. A higher ratio means inventory is moving quickly — the company is selling product efficiently. A lower ratio may indicate overstocking, slow sales, or obsolescence risk.
This metric is critical for retail, manufacturing, and distribution businesses where inventory is a major asset. For companies that do not carry physical inventory (software, services), this metric is not applicable.
Inventory Turnover = Cost of Goods Sold (TTM) / Average Inventory
GeminIQ divides TTM COGS by the average of current-period and year-ago inventory, sourced from SEC filings.
A: Grocery stores and fast-moving consumer goods companies may have turnover above 12 (inventory cycles once a month). General retailers typically range from 4 to 8. Heavy manufacturing may be 2 to 4. The key is comparing against industry peers and tracking trends — declining turnover may signal demand weakness.
A: Days Inventory Outstanding (DIO) is simply 365 divided by inventory turnover. It converts the turnover ratio into the average number of days inventory sits before being sold. Both metrics tell the same story in different formats.
A: The numerator (COGS) can differ if the platform uses a different line item — some use cost of revenue, which may include service delivery costs, while COGS is specifically the cost of goods. Inventory definitions can also vary if the aggregator reclassifies items. GeminIQ uses the as-filed values for both.