Stock turnover rate is a financial metric that measures how a company’s inventory is sold over a given period of time. It is calculated by dividing the cost of soldGS) by the average value of inventory. A high stock turnover rate indicates efficient inventory management and suggests that a company is able to sell its inventory quickly, minimizing the risk of products obsolete or outdated.
On the other hand, a low stock turnover rate may indicate inefficiencies in inventory management, such as overstocking or slow-moving products. Ultimately, the stock turnover rate provides valuable insight into a company’s ability to effectively manage its inventory and meet customer demands.