Varastokierroksen

Varastokierroksen is a Finnish term that translates to "inventory turnover" or "stock turnover" in English. It is a key financial metric used by businesses to measure how many times a company has sold and replaced its inventory during a specific period. A higher inventory turnover ratio generally indicates that a company is selling its products efficiently, while a lower ratio might suggest that the company is holding too much inventory or that sales are slow.

The calculation for inventory turnover is typically done by dividing the cost of goods sold (COGS) by the average inventory value for the period. COGS represents the direct costs attributable to the production or purchase of goods sold by a company. Average inventory is usually calculated by taking the sum of the inventory at the beginning and end of the period and dividing by two.

Analyzing inventory turnover is crucial for managing working capital and identifying potential issues within a business. A very high turnover might indicate that the company is not keeping enough stock, potentially leading to lost sales if demand exceeds supply. Conversely, a low turnover could signal obsolete inventory, poor sales performance, or excessive purchasing. Businesses often compare their inventory turnover ratio to industry averages and their own historical performance to gain insights into their operational efficiency.