stockturn

Stockturn, also known as inventory turnover, is a financial ratio that measures how many times a company has sold and replaced its inventory over a given period. It is calculated by dividing the cost of goods sold (COGS) by the average inventory value for that same period. A higher stockturn generally indicates that a company is selling its products efficiently, while a lower stockturn might suggest that inventory is not moving as quickly, potentially leading to increased storage costs and the risk of obsolescence.

The formula for stockturn is: Stockturn = Cost of Goods Sold / Average Inventory. Average inventory is typically calculated by summing the inventory value at the beginning of the period and the end of the period and then dividing by two. Different industries have vastly different typical stockturn ratios. For example, grocery stores often have very high stockturn due to the perishable nature of their goods, while businesses selling heavy machinery might have much lower stockturn.

Analyzing stockturn is crucial for inventory management. A business might aim to increase its stockturn by improving sales forecasting, optimizing pricing strategies, or streamlining supply chain operations. Conversely, an excessively high stockturn could indicate insufficient inventory levels, potentially leading to stockouts and lost sales. Therefore, understanding and monitoring stockturn is a key component of effective inventory control and financial performance assessment.