The Inventory Turnover Ratio Formula is an accounting tool used to measure a company’s performance in terms of its ability to efficiently manage and sell its inventory. This ratio tells you how often a company sells its inventory in a given period of time. It’s calculated by dividing the total cost of goods sold over the average value of its inventory. A high number indicates that the company is selling its goods quickly, while a low one means it’s not moving them off shelves as quickly. By understanding this formula, businesses can make better informed decisions about their product lines and inventory levels to maximize profits.