Glossary
What is Inventory Turnover Ratio?
Last updated July 2026
Inventory turnover is how many times a business sells and replaces its average inventory in a year. Higher turns mean less cash tied up per dollar of sales.
Also known as: Inventory turns, stock turns
Inventory Turns = Cost of Goods Sold ÷ Average Inventory Turns and DSI are two views of the same thing: turns ≈ 365 ÷ DSI. A distributor turning inventory four times a year holds roughly 90 days of stock.
Adding a single turn releases working capital roughly one-for-one with the inventory it removes — which is why finance watches this number closely.
Distribution: 3–6 turns typical; best-in-class exceeds 6.
Part of Working capital & inventory turns.
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