![]() ![]() Some compilers of industry data (e.g., Dun & Bradstreet) use sales as the numerator instead of cost of sales. This often can result in stock shortages. Inventory: A low turnover rate may point to overstocking, obsolescence, or deficiencies in the product line or marketing effort.Ĭonversely, a high turnover rate may indicate inadequate inventory levels, which may lead to a loss in business as the inventory is too low. However, in some instances a low rate may be appropriate, such as where higher inventory levels occur in anticipation of rapidly rising prices or expected market shortages. The average days to sell the inventory is calculated as follows:Īverage days to sell the inventory = 365 days / Inventory turnover ratioĪ low turnover rate may point to overstocking, obsolescence, or deficiencies in the product line or marketing effort.Inventory turnover = Cost of goods sold/Average inventoryĪverage inventory = (Beginning inventory + Ending inventory)/2 Inventory turnover is also known as inventory turns, stockturn, stock turns, turns, and stock turnover. The equation for inventory turnover equals the cost of goods sold divided by the average inventory. In accounting, the Inventory turnover is a measure of the number of times inventory is sold or used in a time period, such as a year. holding cost: In business management, holding cost is money spent to keep and maintain a stock of goods in storage. ![]() Conversely, a high turnover rate may indicate inadequate inventory levels, which may lead to a loss in business as the inventory is too low.A low turnover rate may point to overstocking, obsolescence, or deficiencies in the product line or marketing effort.Average days to sell the inventory = 365 days /Inventory turnover ratio.Inventory turnover = Cost of goods sold/Average inventory. ![]()
0 Comments
Leave a Reply. |