Read the formula and its variables
Use a matching cost-of-sales period and explicitly chosen average inventory.
| Input | Meaning |
|---|---|
| COGS | Cost of goods sold during the period |
| Average inventory | Corresponding balance base |
Inspect a stated example
COGS 300 and average inventory 40 give 7.5 turnovers in the period.
The illustrative inputs are not an actual issuer’s data. Match balance coverage, flow period and units before applying the formula.
Keep the conclusion within the evidence
Inventory mix, costing policies and seasonality can change comparability. The ratio does not identify a stockout or obsolescence problem on its own.
A ratio change can motivate a further question. It does not automatically identify the transaction, risk or operational outcome that produced it.