ACCOUNTING GLOSSARY
Inventory Turnover
Inventory Turnover
How often inventory is sold and replaced over a period.
What does Inventory Turnover mean?
How often inventory is sold and replaced over a period. Professionals may calculate, document or apply this concept differently depending on the transaction, accounting method, lender policy and governing documents. Borrowers should confirm the precise definition used in any term sheet or agreement.
Inventory Turnover in context
COGS of $2 million divided by $500,000 average inventory equals four turns.
Why it matters in financing
Inventory Turnover can influence how a lender, investor or advisor evaluates risk, pricing, structure, repayment capacity or transaction economics. It should be considered together with the complete financial picture rather than used alone.
Related accounting terms
Educational information only. This definition is general, may not match a particular lender or contract, and is not financial, accounting, tax or legal advice.