Turnover Ratios

Turnover Ratios/efficiency/asset management ratio

Turnover ratio shows the efficiency along with that the firm utilized the asset or resources at its disposal to create sales revenue or turnover.

This ratio including like:

a) Stock/inventory turnover = Cost of Sales/Average stock

The ratio signifies number of times the stock was turned in sales in a year that is how many times the 'buy-sell' process occurred during the year. Such the higher the stock turnover, just for the better the firm and moreover the higher the sales.

b) Stock holding period   = 365 days/ Stock turnover

(365 x Average stock)  / Cost of sales             

that is  

365 / Stock turnover

The ratio signifies number of days the stock such was held in the warehouse before being sold.

The lower the stock holding period the higher the stock turnover, and vice versa.