The Inventory Turnover Ratio Calculation is a simple calculation used to measure how quickly a business moves its stock on-hand or inventory. It is calculated by dividing the average cost of goods sold (COGS) over a period of time, by the value of the average inventory held during that same period. A higher ratio indicates more efficient inventory management, while a lower ratio could indicate that a business is stocking more inventory than it can sell. Knowing your Inventory Turnover Ratio can help you make sure you have the right amount of inventory to meet customer demand and keep operating costs low.