What Is Stock Turnover?
Stock turnover measures how many times your inventory is sold and replaced over a period — a higher number means stock is moving quickly, not sitting on the shelf tying up cash.
Direct answer
Stock turnover measures how many times your inventory is sold and replaced over a period. A higher number means stock is moving quickly; a lower number means cash is sitting on the shelf longer before it comes back as a sale.
This is the standard inventory turnover calculation used in supply chain and operations accounting — see ASCM's Distribution & Channel Management Metrics.
| Cost of Goods Sold (the month) | ₵14,000 |
| Opening Inventory | ₵12,000 |
| Closing Inventory | ₵12,000 |
| Average Inventory Value | ₵12,000 |
| Stock Turnover | 1.17 |
A turnover of 1.17 for the month means, roughly, that the shop sells through the equivalent of its entire average stock value about once every 26 days (30 days ÷ 1.17).
What a high or low figure suggests
High turnover generally means cash isn't sitting idle in stock for long — but extremely high turnover can also mean you're understocked and risking running out. Low turnover often means cash is tied up longer than necessary, and is worth checking against Dead Stock — a low turnover figure is sometimes just a few genuinely dead items dragging the average down.
Limitations
This is an average across everything you sell. A shop selling both fast-moving and slow-moving product lines will get one blended number that doesn't tell you which specific products are the problem — for that, you need to look at sales history by product, not just the overall ratio.
What this connects to
Stock turnover is one of the main inputs into deciding how much stock to keep, and it's central to understanding why stock ties up cash in the first place.