Inventory Turnover Ratio

The Inventory Turnover Ratio is a metric used in business to measure how efficiently a company manages its inventory. It's calculated by dividing the cost of goods sold by the average inventory level. Generally, a higher ratio is better, but it's important to consider the industry. A grocery store will naturally sell through inventory faster than a car dealership. The average inventory turnover ratio for e-commerce businesses is around 4-6 times per year. This means that on average, an e-commerce business sells and restocks its inventory every 2-3 months.