What is the stock turnover?
Shares turnover represents how many times the company sells through its inventory. Retail stores often use this metric to determine their operations. High stock turnover usually means high consumer demand for company products. Accounting conditions provide information on the calculation of turnover and evaluate the effective use of the Company's assets. In order to calculate this number and the evaluation of operations, information from the profit and balance sheets and balance sheets is necessary. First, the formula can divide the sale by inventory; Secondly, accountants can divide the costs of goods sold by an average inventory. Either the formula provides the necessary information to review shares turnover and determine how well the company is sold through its inventory. Accountants can calculate the situation at any time of the year. Monthly and annual calculations are often the most common use of this accounting ratio.
Example of Jespěnosty, which has $ 125,000 inventory (USD) on sale and $ 85,000. Turnover of shares forThis company is 1.47, which means that the company sells almost one and a half times every period through its full inventory. Assuming these formulas for one month, the company must order at least half of its current inventory to meet the sale. Indeed, the ratio itself cannot determine the effective use of assets. Further steps are necessary to prove the efficiency or evaluation of operations.
Accounting conditions are common benchmark tools to assess the company's operation. Accountants can monitor shares turnover for several months in a row. Benchmark The process compares the current ratio of stock turnover to the previous period in an effort to find out whether the company's turnover is better or worse. Companies can also use the ratio to compare their operations to industrial standard. This helps Company to find out whether it works better or worse under the same economic conditions as other businesses.
The high level of stocks is often the main disadvantage in retail companies. Companies usually experience an increase in operating costs, including transfer, processing, accounting and management and expenditure management. Companies use stock turnover and control processes to determine whether they can improve turnover to increase sales and lower costs. For example, if the company turnover is lower than the industry average, there is a potential for increasing turnover. However, the turnover of shares that is higher than the average of the industry may indicate that the company works as effectively as possible and is unable to improve turnover.