The Inventory Turnover Formula Ratio is one of the most important metrics for assessing business performance. It measures how quickly an organization is converting its stock of materials and products into sales revenue. The formula for calculating this ratio is as follows: Cost of Goods Sold (COGS) ÷ Average Inventory during the period = Inventory Turnover Ratio. By understanding this key metric, businesses can identify areas where they are overstocking or understocking, helping them identify opportunities to optimize their operations and improve their profitability.