High stock turnover rate
Inventory turnover is an important metric for evaluating how efficiently a firm turns its inventory into sales. Below is a discussion of what a high turnover ratio says about a company. High volume/low margin industries tend to have the most inventory turnover, calculated as the cost of goods sold divided by average inventory value. A high inventory turnover generally means that goods are sold faster and a low turnover rate indicates weak sales and excess inventories, which may be challenging for a business. Inventory turnover can be compared to historical turnover ratios, planned ratios, and industry averages to assess competitiveness and intra-industry performance.