2 min read
Definition
Stock turnover (or inventory turnover) measures how many times a business sells and replaces its stock over a period. A higher turnover means stock moves quickly and less cash sits tied up in inventory; a low turnover signals slow-moving stock and trapped working capital.
In plain terms
If you sell through your average stock six times a year, your stock turnover is six, and stock sits for about two months before selling. The slower it turns, the longer your cash is frozen on the shelf rather than working in the business.
Why it matters
Stock turnover is a core cash-flow metric, not just an operational one. It is one leg of the cash conversion cycle, and improving it releases cash directly. See stock and cash flow.
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