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    Tock URN Alculation: Calculation Method A Your Data Your Result

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    Hrod Ward Meneses
    This document discusses stock turn calculations and inventory turnover ratios. It provides formulas to calculate inventory turnover ratios using cost of goods sold, net sales, and average inventory values. Higher inventory turnover ratios generally indicate more efficient inventory management and better profitability. Ratios below benchmarks may suggest issues like overstocking, slow-moving goods, or low business volumes. The document provides benchmarks and defines related terms like dead stock and slow-moving inventory.

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    Tock URN Alculation: Calculation Method A Your Data Your Result

    Uploaded by

    Hrod Ward Meneses
    25 views3 pages
    This document discusses stock turn calculations and inventory turnover ratios. It provides formulas to calculate inventory turnover ratios using cost of goods sold, net sales, and average inventory values. Higher inventory turnover ratios generally indicate more efficient inventory management and better profitability. Ratios below benchmarks may suggest issues like overstocking, slow-moving goods, or low business volumes. The document provides benchmarks and defines related terms like dead stock and slow-moving inventory.

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    This document discusses stock turn calculations and inventory turnover ratios. It provides formulas to calculate inventory turnover ratios using cost of goods sold, net sales, and average inventory values. Higher inventory turnover ratios generally indicate more efficient inventory management and better profitability. Ratios below benchmarks may suggest issues like overstocking, slow-moving goods, or low business volumes. The document provides benchmarks and defines related terms like dead stock and slow-moving inventory.

    Copyright:

    © All Rights Reserved
    Download as XLS, PDF, TXT or read online from Scribd
    Download as xls, pdf, or txt
    25 views3 pages

    Tock URN Alculation: Calculation Method A Your Data Your Result

    Uploaded by

    Hrod Ward Meneses
    This document discusses stock turn calculations and inventory turnover ratios. It provides formulas to calculate inventory turnover ratios using cost of goods sold, net sales, and average inventory values. Higher inventory turnover ratios generally indicate more efficient inventory management and better profitability. Ratios below benchmarks may suggest issues like overstocking, slow-moving goods, or low business volumes. The document provides benchmarks and defines related terms like dead stock and slow-moving inventory.

    Copyright:

    © All Rights Reserved
    Download as XLS, PDF, TXT or read online from Scribd
    Download as xls, pdf, or txt
    of 3

    STOCK TURN C

    Calculation method a Your data Your result

    COGS - Cost of goods sold Benchmark - North American Benchmark & Outlook 2007
    25%th percentile Median
    Raw material stock 5 10
    WIP - Work in process 7.5 15.6
    Finished goods stock 6 12
    Total inventory 4 7

    Formula of Stock Turnover/Inventory Turnover Ratio:


    The ratio is calculated by dividing the cost of goods sold by the amount of average stock at cost.

    (a) [Inventory Turnover Ratio = Cost of goods sold / Average inventory at cost]

    45.00
    40.00
    35.00
    30.00
    25.00 Raw material stock
    WIP - Work in
    20.00 process
    15.00 Finished goods stock
    Total inventory
    10.00
    5.00
    0.00
    25%th percentile Median 75% percentile
    Your result

    Body Mass Index Amount of dead stock Definition: No movement in stock in 1


    Amount of potential dead stock Definition: Stock larger than 24 mont
    of your company SUM of slow moving stock
    Total Inventory Definition: Total inventory
    STOCK TURN CALCULATION
    Calculation method b + c + d Your data

    ican Benchmark & Outlook 2007 Net sales 0


    75% percentile
    18 Average inventory at cost 0
    40.3 Average inventory at selling price 0
    24 Total inventory 0
    13.1

    Generally, the cost of goods sold may not be known from the published financial statements. In such cir
    st. inventory turnover ratio may be calculated by dividing net sales by average inventory at cost. If average
    known then inventory at selling price may be taken as the denominator and where the opening invento
    the closing inventory figure may be taken as the average inventory.

    (b) [Inventory Turnover Ratio = Net Sales / Average Inventory at Cost]


    (c) [Inventory Turnover Ratio = Net Sales / Average inventory at Selling Price]
    (d) [Inventory Turnover Ratio = Net Sales / Inventory]

    Significance of Inventory Turnover Ratio:


    Inventory turnover ratio measures the velocity of conversion of stock into sales. Usually a high inventor
    velocity indicates efficient management of inventory because more frequently the stocks are sold, the le
    is required to finance the inventory. A low inventory turnover ratio indicates an inefficient management
    Raw material stock inventory turnover implies over-investment in inventories, dull business, poor quality of goods, stock ac
    accumulation of obsolete and slow moving goods and low profits as compared to total investment. The
    WIP - Work in ratio is also an index of profitability, where a high ratio signifies more profit, a low ratio signifies low pro
    process inventory turnover ratio may not be accompanied by relatively a high profits. Similarly a high turnover r
    Finished goods stock under-investment in inventories.
    Total inventory
    Source: http://www.accountingformanagement.com/stock_turn_over_ratio.htm

    nition: No movement in stock in 12 month 0


    nition: Stock larger than 24 months of sale 0
    0
    nition: Total inventory 0
    Your result

    d financial statements. In such circumstances, the


    rage inventory at cost. If average inventory at cost is not
    r and where the opening inventory is also not known

    ]
    ng Price]

    nto sales. Usually a high inventory turnover/stock


    quently the stocks are sold, the lesser amount of money
    cates an inefficient management of inventory. A low
    s, poor quality of goods, stock accumulation,
    mpared to total investment. The inventory turnover
    rofit, a low ratio signifies low profit. Sometimes, a high
    profits. Similarly a high turnover ratio may be due to

    _ratio.htm

    Your Body Mass Index


    As a rule of thumb the
    <5% BMI in this calculation
    should not exceed 5%.

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