⚡Efficiency Ratios
Inventory Turnover
Cost of Goods Sold ÷ Average Inventory = Inventory Turnover
What It Means
How many times you sell through your inventory per year.
✓Higher = inventory sells faster
Example
COGS:$500,000
Average Inventory:$100,000
$500,000 ÷ $100,000
Inventory Turnover = 5
→ Inventory turns over 5 times per year
Related Formulas
Days Sales in Inventory
365 ÷ Inventory Turnover = Days Sales in Inventory
Accounts Receivable Turnover
Net Credit Sales ÷ Average Accounts Receivable = A/R Turnover
Days Sales Outstanding (DSO)
365 ÷ Accounts Receivable Turnover = Days Sales Outstanding
Asset Turnover
Net Sales ÷ Average Total Assets = Asset Turnover
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