How an inventory turnover ratio is calculated?

Inventory turnover ratio = Units sold ( issue ) in last12 months / ( (Beginning inventory + Ending inventory ) /2 )

A low turnover rate may give an indicator of wrong or deficiencies in using inventory

Inventory Turnover =Cost of Goods Sold / Average Inventory or Sales / inventory

 

First of all, it is a ratio that showing how many times a company's inventory is sold and replaced over a period. 
Inventory Turnover ratio = Cost of Goods sold/Average Inventory.
  *Cost of Goods sold: it comes from Income Statement.
*Average Inventory: it equals to ((Beginning Inventory+Ending Inventory)/2) it comes from Balance Sheet   ..
Low Turnover implies poor sales, therefore, excess inventory.
..
high ratio implies either strong sales or ineffective buying.However very high ratio may be accompanied by loss of sales due to inventory shortage.
 

Inventory turnover ratio is calculated using the following formula: Inventory Turnover = Cost of Goods Sold Average Inventory Inventory turnover ratio is used to measure the inventory management efficiency of a business.
In general, a higher value of inventory turnover indicates better performance and lower value means inefficiency in controlling inventory levels.
A lower inventory turnover ratio may be an indication of over-stocking which may pose risk of obsolescence and increased inventory holding costs.
However, a very high value of this ratio may be accompanied by loss of sales due to inventory shortage.
Inventory turnover is different for different industries.
Businesses which trade perishable goods have very higher turnover compared to those dealing in durables.
Hence a comparison would only be fair if made between businesses of same industry.

Another way to look at inventory turnover ratio is to divide the cost of material entered into Inventory in a given period, by the cost of items Issued or removed from the Inventory in the same period.

Ineventory Turovers = avberage sales of the product

Inventory turnover = cost of sales ÷ average inventory shows whether a company maintains a large inventory, and whether a company sells stock at a lower rate compared to others