What Does an Inventory Turnover Ratio of 1.5 Mean?

An inventory turnover ratio of 1.5 is equivalent to your company carefully rotating a large wheel.  It means you only sell and replace your whole stock roughly once and a half a year, which means your items languish on the shelf for an average of eight months.

This isn't necessarily a bad sign—it could simply mean you deal in high-value, slow-moving goods. However, it’s a powerful nudge to ask important questions: Is this by design, or is capital sitting idle? Understanding this number is the first step to optimizing your cash flow and ensuring your inventory is working as hard as you are.