inventory turnover

(redirected from Inventory Turnovers)

Inventory turnover

A measure of how often the company sells and replaces its inventory. It is the ratio of annual cost of sales to the latest inventory. One can also interpret the ratio as the time to which inventory is held. For example a ratio of 26 implies that inventory is held, on average, for two weeks (365 days in a year divided by inventory turnover ratio of 26 equals 14 days pr 2 weeks average inventory holding period). It is best to use this ratio to compare companies within an industry (high turnover is a good sign) because there are huge differences in this ratio across industries.

Inventory Turnover

A measure of how long it takes, on average, for a company to sell and replace its inventory. Inventory turnover can help a company or potential investor determine how well the company manages its inventory. Higher inventory turnover is considered to be desirable. The turnover is calculated as follows:

Inventory turnover = Cost of goods sold / ( ( Beginning inventory + ending inventory ) / 2 )

inventory turnover

A measure indicating the number of times a firm sells and replaces its inventory during a given period and calculated by dividing the cost of goods sold by the average inventory level. A relatively low inventory turnover may indicate ineffective inventory management (that is, carrying too large an inventory) or carrying out-of-date inventory to avoid writing off inventory losses against income. A high inventory turnover is generally desirable.
References in periodicals archive ?
There is a significant relation between average inventory turnovers in days and value of those firms.
* There is a significant relation between inventory turnover in days and value of the listed companies in Tehran stock exchange.
In this paper, we look at the effects on inventory turnovers of U.S.
manufacturing firms' short-term financial management measures including net working capital, inventory turnover and receivables turnover are examined over the 1971-2005 period.
We are interested in the behavior of firms' net working capital, inventory turnover and receivables turnovers when monetary policy is contractionary, and check whether certain firm characteristics help to insulate the firms from the effects of tighter monetary policy.
With analgesic products producing up to 21 inventory turnovers per year, the upside potential is dramatic and very exciting for Cobroxin."
It carries "clear benchmarks" of financial performance, including profit margins, inventory turnovers, pension expense to profit before interest and taxes, bad debts to receipts, and related financial measures.
The measures of operational efficiency include days of sales outstanding, inventory turnover, days cost of goods sold in inventory, asset turnover, and net receivables turnover flow.
Except for inventory turnover, the means for all measures favor of family firms.
Inventory Turnover measures inventory management efficiency.
The DSS also helped the vendor and retailers arrive at jointly agreed upon customer service level and inventory turnover targets.
Vendor Managed Inventory (VMI) systems have been initiated by certain manufacturers to improve both retail customer service levels and inventory turnover. VMI systems achieve these goals through more accurate sales forecasting methods and more effective distribution of inventory in the supply chain.