Businessmate Site Logo

                        Home - About - Advertise

                        Date: 2020-06-08
                        Search Articles by topic

                        Mangement and Leadership

                        Production Management

                        Business Strategy



                        Human Resource Management

                        Organizational Theory & Design

                        National and Organizational Culture

                        Important Business Terms


                        Article Search
                        Search Title & Content:
                        Search Author:

                        Custom Search






                        Inventory Turnover

                        Recommend this article to your friends!
                        The metric Inventory Turnover tries to evaluate how many times a company's inventory is sold and replaced over a period of time.

                        There are generally two ways of calculating the Inventory Turnover Ratio:

                        1) Basic calculation:
                        Inventory Turnover = Sales / Average Inventory

                        In this formula "Sales" is being used as the numerator. This is not an optimal approach, because sales are normally recorded at market value. This means that that the recorded value is higher than the actual value of the inventory, which will make the Inventory Turnover Ratio higher than it really is.

                        2) Alternative calculation:
                        Inventory Turnover = Cost of Goods Sold / Average Inventory

                        In this alternative calculation the numerator "Cost of Goods Sold" is assessed by the actual costs of the inventory. Accordingly, the alternative calculation is more precise in evaluating how often the actual worth of the average inventory is sold and replaced over a period of time.

                        A low turnover implies poor sales compared with the value of the inventory. A high turnover implies strong sales compared to the value of the inventory.

                        Date Created: 2009-11-18
                        Posted by: Admin
                        Inventory Turnover

                        Related resources:

                        Return on Investment (ROI)
                        Return on Assets (ROA)
                        Return on Equity (ROE)
                        Return on Sales (ROS)
                        Return on Capital Employed (ROCE)
                        Contribution Margin and Contribution Margin Ratio

                        Online MBA, Online MBA Courses, Inventory Turnover, calculation, formula


                        Advertise on Businessmate.org


                        Copyright © BusinessMate 2009-2019

                        Home - About - Terms of Use - Contact - Sitemap - Privacy Policy



                                              Mobile Games


                                              Premier League




                                              Real estate