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Inventory Turnover Assignment Help

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What is Inventory Turnover?

Inventory turnover refers to the ratio of measuring the number of times inventory is consumed or sold in a certain period of time. 

The goal of inventory turnover is calculating to see if a business is having excessive inventory as compared to its sales level. Low turnover results in a large investment in inventory, while high turnover results in low investment in inventory. The best way to maintain a relatively low investment in the area will be continual monitoring of inventory turnover.

Turnover Formula

Here is the formula for inventory turnover formula:

Inventory Turnover = Net Sales/Average inventory at the selling price                                  

OR

Inventory Turnover- Cost of Goods Sold/ Average inventory at cost                                       

OR

Inventory Turnover = Cost of material - change in inventories (of ½ and 1/1 goods)/ Inventories

If you happen to get confused or have a hard time remembering the formula of turnover, we have the right solution for you. The experts from our team will share with you some really cool tips so that you never forget the formula ever again in the future. 

Inventory Turnover Equation

 Inventory Turnover Calculation

Here is a simple process for calculating the inventory turnover ratio:

• First, you will have to determine the total cost of goods that are sold from your annual income statement
• Add together the beginning inventory and ending inventory balances for a single month and then divide by two
• The last step would be dividing the cost of goods sold by the average inventory

Here is the formula to simplify your understanding:

Cost of goods sold ÷ Beginning inventory + Ending inventory/ 2

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Inventory Turnover Definition

Inventory turnover can be defined as a financial ratio that shows how many times a company may sell and replace inventory during a certain period of time. Using the inventory turnover formula, the company will divide the days in the period to calculate the total days taken for selling the inventory on hand. 

It is useful for businesses as it helps in making better decisions on pricing, marketing, manufacturing, and purchasing new inventory.

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Inventory Days Formula

Inventory days is an important inventory metric that measures the total duration of time for a product being in storage before it is being sold. If the percentage is high, it would mean that there might not have enough demand for it. It also means that products might be too expensive and thus its promotion ideas need to be rechecked.

An estimate of inventory days is very useful for distribution since it allows a proper allocation of storage costs for inventory.

Example: If a product has an annual cost of 35%, but if it’s in the inventory for 5 months, how much is was paid in holding costs? The answer to the calculation is 7%.

Here is the formula for inventory days:

Inventory days= 365/ Inventory turnover

Stock Turnover

Stock turnover, also known as inventory turnover refers to a financial ratio that determines the number of times a company has sold and replaced inventory during a certain period of time. Using the inventory formula the company will be able to divide the days in a period for calculating the days it may rake for selling inventory on hand.

If you want to learn more about stock turnover, you can contact our highly qualified experts. They know the ins ad out of the topic and thus can provide you detailed guidance on it.

Days Inventory Held Formula

Rate of Sock Turnover

The rate of stock turnover shows the total number of times stocks in a business have been turned over or replaced in a year. It refers to the measure of sales performance. The higher is your stock turnover rate, the better your stock will be performing.  

It updates your company managers and executives on how you had been converting your inventory into sales. It will show how well your inventory is being managed and also let you know if it is being mismanaged.

What is Inventory Turnover?

What does Inventory Turnover Measure?

It measures the number of times a company replaces inventories that are sold in a period of time. When there is a slow turnover, it will weak sales and possibly excess inventory, whereas a faster ratio will indicate either strong sales or insufficient inventory.

If you are looking for a detailed understanding or calculation on measurement of inventory turnover, MyAssignmenthelp.com can assist you. 

Stock Turnover Ratio

The stock turnover ratio is defined as an efficiency ratio that measures how efficiently inventory is managed. Its purpose is to show the relationship between “cost of goods sold” and “average inventory”. 

Inventory turnover ratio = Cost of goods sold/ Averages inventory

The ratio can be further used to find out if there are any excessive inventory levels as compared to sales. It also helps with determining stock-related issues like overvaluation and overstocking.

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Stock Holding Period Formula

How to Improve Inventory Turnover?

Inventory management is essential for any eCommerce business. It is not about just selling items but also about how well you can evaluate your products and based on the evaluation of how well you market them. The key to an efficient inventory process is backing with smart strategy ad management.

 Calculating inventory turnover will not be enough. Your inventory management will be much more efficient, boost sales and cut warehousing costs when you improve your inventory turnover.

Here are a few strategies on how you can do that.

1. Effective marketing
2. Smart pricing strategy
3. Speeding up the shipping
4. Encouraging customers to proceed
5. Efficient restocking
6. Automation
7. Be regular with negotiating price rates
8. Proper forecasting
9. Stock inventory that sells
10. Encourage sale of old stock

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