What does an inventory turnover ratio of 5 mean?

It means the company sold and replaced its average inventory five times during the period. Translated into days of stock on hand, that is 365 ÷ 5 = 73 days. Whether that is healthy depends on lead times, demand volatility, and target service level, not on the number alone. A 73-day cover may be tight for a business with two-week replenishment lead times, and comfortable for one sourcing components from overseas with quarterly shipments. The same ratio can also hide very different SKU mixes, so the figure becomes meaningful only when read alongside service level performance and segmentation by product family.