Your inventory turnover ratio is one number that tells you whether your inventory is working for your business or quietly working against it. A high ratio means product is moving; you are selling through stock quickly, freeing up cash and keeping storage costs low. A ratio that is too low means capital is sitting in unsold goods, accumulating holding costs, and edging toward obsolescence. But the relationship is not simply ‘higher is always better’: a ratio that is too high can signal understocking, missed sales, and a supply chain with no buffer against disruption. This guide covers what inventory turnover ratio is, the formula with a two scenario worked example, what your number actually means against 2026 ecommerce benchmarks broken