What is inventory turnover, Financial Management

What is Inventory turnover

The shortcoming of this ratio is that average calculation based on beginning and year-end inventory may not represent actual average in year. Other limitations in stock ratios are:

  • Inclusion of obsolete stock
  • Different stock valuation policies

Inventory turnover is reciprocal of inventory days

Cost of sales/Average inventory (number of times)

It demonstrates how quickly the inventory is being sold. It illustrates the liquidity of inventories, the higher the figure the quicker the inventory is sold.

 

Posted Date: 8/31/2013 5:46:06 AM | Location : United States







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