inventory turnover


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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inventory turnover may indicate ineffective inventory management (that is, carrying too large an inventory) or carrying out-of-date inventory to avoid writing off inventory losses against income.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 ?
These variables are: accounts collectables, average outstanding, and inventory turnover in days with cash cycle.
The inventory turnover and fixed asset turnover ratios are significantly higher in U.K.
Inventory Turnover = Cost of the Sales/Average Inventory Inventory Turnover (Days) = 365/Inventory Turnover
The inventory turnover period is expressed in days and it is obtained by dividing the total inventories multiplied by calendar time to turnover.
Generally a high inventory turnover ratio is an indication of favourable position while a low inventory turnover ratio signifies over investment on inventory or excessive inventory.
[H.sub.1]: Crisis era Inventory Turnover Rate is significantly differing from pre-crisis era.
From January to May, the operating costs of SOEs increased by 45.5 percent and inventory turnover rate got doubled in January-May compared with the same period last year.
The inventory turnover ratio can be a very useful tool.
The company is finalising a system to standardise andoptimise inventory turnover indicators, which will be applied to every product company wide during the first half of 2010.
As of the end of the third quarter, LG's inventory turnover period is down more than 10 days from the previous year and has resulted in a cost reduction of approximately $150 million.
The long inventory turnover in the Far East, where most of Polymetal's operations are located, suggests that the impact of devaluation could be delayed, with the larger effect likely to come in 2H09.