Final answer:
Inventory turnover is a measure of a company's efficiency in managing its inventory, calculated using the formula: Inventory Turnover = Cost of Goods Sold / Average Inventory.
Step-by-step explanation:
Inventory turnover refers to the number of times inventory is sold and replaced during a specific period, usually a year. It is a measure of a company's efficiency in managing its inventory. The formula for inventory turnover is:
Inventory Turnover = Cost of Goods Sold / Average Inventory
For example, if a company has $1,000,000 in cost of goods sold and an average inventory of $200,000, the inventory turnover would be 5.