Stock Turnover Ratio
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Key Takeaways
- The stock turnover ratio shows how fast a company sells and replaces inventory. To calculate it, divide the cost of goods sold by the average list. This ratio helps businesses manage inventory and track sales rates.
- A high stock turnover ratio can indicate strong demand and quick sales but may also result in missed sales opportunities and supplier price increases.
- Low stock turnover could mean poor capital management or a strategy to accumulate inventory. However, the stock turnover ratio has limitations as a financial measure.
Frequently Asked Questions (FAQs)
1
Should the stock turnover ratio be high or low?
2
What is the four in-stock turnover ratio?
3
What is a stock turnover ratio used for?
4
Can the stock turnover ratio be different for different industries?
