Good inventory turnover will depend on the industry. For instance, home sales is much slower than groceries and personal goods.
Higher Rates
An unusually high Inventory Turnover Ratio compared to Industry could mean a Business is losing sales because of inadequate stock on hand.
can sell at lower prices and still make good profit
ending inventory
cost of goods sold/ Average inventory
Higher Rates
An increase in inventory turnover is good. This means that over a certain period of time, the amount of times the inventory of a company was sold and replaced has increased.
Inventory turnover is the standard at which product inventory is acquired or made and further sold within a year. An assessment of all inventory-related business factors will have an impact on inventory turnover.
Generally inventory turnover period is calculated as: Sales/Inventory Also by, Cost of Goods Sold/ Average Inventory
Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory and Average Inventory = ( Beginning Inventory + Ending Inventory ) / 2
To calculate the inventory turnover ratio, you need to divide the cost of goods sold by the average inventory. To find the average inventory, add the beginning and ending inventory levels and divide by 2. In this case, the average inventory is (4500 + 5500) / 2 = 5000. The inventory turnover ratio would be 20000 / 5000 = 4.
inventory turnover rate is given by cost of good sold/inventory
An unusually high Inventory Turnover Ratio compared to Industry could mean a Business is losing sales because of inadequate stock on hand.
The annual inventory turnover in the retail painting industry is obtained by dividing the Annual Cost of Sales by the Average Inventory Level. A low inventory turnover ratio is a signal of inefficiency.
prophitability
can sell at lower prices and still make good profit
ending inventory