Inventory Turn Over Ratio

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howste

Thaumaturge
Trusted Information Resource
#2
If I understand, you're talking about what's commonly called inventory turns. It's used as a measure of inventory efficiency. Ideally you want to have enough inventory to keep running without excess. - the more inventory you have, the more of the company's money that is tied up and can't be used for other things.

Take the total inventory. Determine how many times you would use that amount of inventory in a year. If you generally keep about a month's worth of parts, you would have 12 turns per year.

Is that what you're talking about?
 
H

HiroMatsu

#3
Inventory turnover ratio is showing how many times a company's inventory is sold and replaced over a period.
Iit is calculated as:

SALES WORTH/INVENTORY WORTH.
If your cost of goods sold during the period is $100 and your average finished products inventory during the month is $10, then your finished products inventory turnover ratio is 10 ($100 / $10 = 10). This implies that you are able to sell out your inventory ten times during the reporting period.

A high inventory turnover ratio indicates that the product is selling well:agree1:. If the value of the inventory turnover ratio is low, then it indicates that the management team doesn't do its job properly in managing inventories:cool:.

The level of inventory that should be kept depends from one industry to another. For instance manufacturers and retailers should have a higher level of inventory, whereas software makers or advertising companies require lower levels of inventories.
 

antoine.dias

Quite Involved in Discussions
#6
Hello Everyone,

Help me to understnad Invetory Turn over ratio ??
This has been discussed overhere.
I have attached 2 files which I found via google in combination with previous discussions here.

Hope this helps,

Antoine
 

Attachments

B

bhartigambhir

#7
Please also advice when i am calculating first time ITR which inventory i have to take and how i will caluculate the same
 

harry

Trusted Information Resource
#8
Please also advice when i am calculating first time ITR which inventory i have to take and how i will caluculate the same
If I am not mistaken, you need this information for your TS purpose. Could you get it from your accounting department? Even with our local financial package, the accounting boys could give me this kind of information with a few strokes of the key.
 
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