MBATricks

Tips and Tricks about my MBA experience

Finance :: Performance Ratio :: Inventory Turn-over

 

The Inventory turnover shows how quickly the inventory of the company is turned over on a specific period of time.

 

Inventory Turnover = COGS / Inventory (finished goods)

 

A low turnover may mean that the company is having a lot of stocks. Generally, the higher the better as it means that the company is not stocking a lot. A low rate can be good if the company is anticipating rising prices or products shortages.

 

The COGS and the Inventory are taken from the company’s Balance Sheet.

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