What is the turnover of stocks?
Inventory turnover refers to the amount where the inventory is sold and replaced in a given period, as a year. The low turnover rate may indicate that trades are gaining excess stocks, which may mean they have problems while high turnover indicates that a fast trade trade. Inventory turnover is one of the many metrics used to assess the financial health of large and small companies, and business owners can regularly assess their stock turnover to find out how they are doing.
Two different formulas can be used to achieve the number of inventory turnover. First of all, people distribute the cost of selling an inventory. However, this method may be defective because the stocks are usually expressed in wholesale value, not in retail value, which means that the result of this equation will be distorted. Instead, some people prefer to divide the costs of the goods sold, reflecting the price paid by the average inventory. Using an average stock, they avoid bevelled results caused by seasonalMi changes, such as radical differences in the inventory that appear in November and December in many regions of the world.
Sometimes the rate is low because the company is preparing for goods in preparation for a large event, in which case the company can be absolutely healthy, although it has a low stock ratio. On the other hand, an extremely high rate can serve as a warning that the trade does not have to maintain sufficient stock in stock and consumers could be frustrated by lack of possibilities caused by poor inventory management. Companies must find their balance and use their resources wisely to create the best revenues when managing their inventory.
People who drive their supplies must also think about how they will allocate funds. For example, a company could buy a very large dose of a specific item, Tying capital in inventory until it sells or could buy a small DTa, use resources from this sale to buy another small dose, and so on, thereby release the funds for further use. Maintaining too many expensive stocks can be a bad idea for a company that needs financial flexibility because it can be forced to sell inventory quickly to gain capital.
Inventory turnover also reflects consumers' interest in products that the company sells. If the company experiences a high level of turnover, which gradually slips low, it indicates that consumers' interest can be cooling and that it is time to make some inventory modifications. On the contrary, if the rate of turnover suddenly begins to rise sharply, it means that there has been an increase in the interest of the consumer, which should be solved.