What is the conversion of stocks?
Inventory transfer is an act of transforming the product or stock of the company to the goods sold and the level of conversion in stock is the rate for which the inventory is sold. This is a significant value, especially for retail businesses, which often have to reverse their inventory quickly. Invention conversion time represents the number of days in stocks before selling and exchanging. This is important for retailers who aim to quickly turn their shares or need to plan shopping and supplies. Inventory conversion time can be detected by calculating the stock turnover ratio, indicating how many times the stocks will be converted during the year. The resulting value will be the stock turnover ratio. The use of average turnover ensures that the resulting figure allows any seasonal deviations to the inventory level. The result of this calculation shows how many times an average has changed during the accounting period. The retailer may consider this to be useful, especially if it is applied to individual product lines or categories, as this may indicate the possibility of loss of inventories via againTaration or deterioration of the product over time.
As soon as the retailer knows the stock turnover ratio, the average number of days for which the inventory is held can be calculated. The total number of days in the total period, as year, is divided by a newly determined ratio. For example, if the inventory is turned 10 times, then each warehouse item is held on average 36.5 days based on the fact that it is 365 days in the year.
Depending on the type of goods in which the company deals with, the slow rate of conversion may be a sign of potential liquidity problems. The rulership rate of inventory conversion would probably be very different for luxury furniture trade compared to a supermarket or similar rapidly moving sales of consumer goods. Retail stores must always consider the need to keep the stock as low as possible and balance it with the need to supply goods to customers on request and avoid waiting times.
Meko of conversion inventory with OHLEDEM for each product or category is a guide to the future purchase policy for these products. The average rate of stock turnover itself would not be a sufficient guide, because the company must plan demand in the demand that result from holidays and festivals. Comparison of reserves of goods over time may indicate a change in consumer taste. Modern technologies, such as the Radio Frequency ID, allow wholesalers and retailers to control with a great deal of accuracy of stock levels and stores and allows these businesses to fine -tune their shopping policy.