Inventory Turnover Rate is a key performance indicator for assessing the efficiency of a business’s underlying operations. It measures how quickly inventory is sold off and replaced with new items, and therefore provides insight into the financial health of the company. The formula for calculating the Inventory Turnover Rate is: (Cost of Goods Sold) / (Average Inventory), expressed in “turns” or times. By contrast, a high turnover rate indicates that the company is efficient at moving its inventory and generating revenue. Thus, analyzing the inventory turnover rate is an essential business practice when considering the overall profitability of a company.