Inventory turnover

The inventory turnover ratio is a measure of the materials management for industrial companies. It specifies the number of times the average inventory of a product was completely removed and replaced in a specified period from a warehouse. It can be both for raw materials or auxiliary materials, which are further processed in their own company, as well as to finished products that are sold.

Especially for retail companies the stock turnover is an important indicator for assessing the contribution of the power factor goods to operating success. Because of the possibility of differentiation in inventory turnover by varieties, articles, article groups, types of goods and operations (eg subsidiaries) these ratios are useful indicators of high and low points of the trading company within the meaning of strategic management. The related to the total stock turnover is also suitable as inter-company code for the operation of comparison.

Aim high turnover rate

Achieving the highest possible inventory turnover is a goal of operational controlling.

For financial analysts may be cause for haircuts a low inventory turnover.

Dependencies

Storage is from a business perspective is tied-up capital, which the company is not available. A high inventory turnover is in addition to the low liquidity bond also synonymous with relatively low storage or inventory. Since the stored goods can lose value over time, there is a risk that accounting adjustments or price reductions ( copies ) are required. This applies especially to solids with rapid impairment, such as computer components, fashion items and perishable goods.

For commercial enterprises, the stock turnover is both an indicator of the success contribution of individual items, groups of items or even the entire range, on the other hand, a benchmark for the calculation. The higher the inventory turnover, the less can be calculated, in principle, the gross margin to achieve a constant gross profit ( " gross benefit" ) for individual items range parts or the whole range.

Distinction between

The frequently encountered term " inventory turnover " should be avoided since the dimension of speed " road per time unit " is; when stock turnover is, however, a mere speed with the dimension " units per unit of time ". From the complete sale of all goods sold weekly in the food retail sector about the article butter, resulting in a turnover frequency of 52 ( times a year ).

Calculation of inventory turnover

Inventory turns always depends on the considered period.

Or

Or

The average inventory is usually simplified (imputing a constant inventory decrease speed ) determined by the arithmetic mean of the period start and period ending:

A more accurate calculation of the average inventory is when the initial stock twelve months end stock levels are added together and then divided by thirteen. If one uses a rolling 12- month period, then seasonal imbalances are balanced.

Documents

• Material Management and Warehousing
• Trade
• Operating performance measure