The inventory turnover ratio is a ratio between the cost of goods sold and the average inventory balance. To create a more meaningful ratio it is advised to create the ratio based on inventory type. Also this ratio represents an average of all inventories and does not reflect the turnover rate for individual items. The value of this ratio will significantly change based on the industry so only comparisons by like companies will have any meaning.
To calculate inventory turnover:
Inventory turnover = cost of goods sold / average inventory
Some computational side notes: