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Finance Glossary

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Inventory Turnover

Definition:

This measures how often a company sells and replaces its inventory over a discrete time period (i.e., a year, a month, etc.). It is calculated by dividing a company's Cost of Goods Sold (COGS) by its Average Inventory. Average Inventory is calculated by adding its beginning inventory and ending inventory (as shown on the balance sheet) and dividing by 2.

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