The calculation of Inventory Turnover Ratio is an important metric for assessing an organization’s efficiency in managing its inventory. It measures the number of times, on average, a business cycles through its stock throughout the year. A high turnover ratio reflects quick sales and efficient inventory management; a low ratio means that it takes longer to sell, or that too much inventory is being held. Knowing this ratio helps businesses better understand their inventory systems, optimize their supply chain, and fine-tune their pricing strategies.