Inventory (stock) turnover days = 360/Inventory turnover times = (average inventory x 360)/cost of products sold
Inventory (stock) turnover times = cost of products sold/average inventory
Inventory turnover days formula
Inventory turnover rate = annual cost of products sold/average annual value of inventories
Also in the sub- : Raw material inventory turnover = annual material consumption/average inventory value of raw materials
Work-in-process inventory turnover = production output/average inventory value of work-in-process
Turnover definition = [(average monthly amount of self-purchased direct materials received in the current year) x 12] ÷ average monthly amount of self-purchased direct materials on hand in the current year
The Strong> Expanded:
Inventory turnover is equal to the cost of materials sold divided by the average inventory. In this case, cost of materials sold is the total cost of materials included in the sale of the final product completed by the company, while average inventory is the average inventory of all raw materials, work in process, finished goods, and all slow-moving materials on hand.
Average inventory in this context is usually the average of inventories at various points at the end of each financial period. Some companies take the average of inventory at the end of each financial quarter, while others take the average of inventory at the end of each month.
The purpose of the inventory turnover assessment is to plan and forecast the cash flow of the entire company from a financial point of view, and thus to assess the level of demand and supply chain operations of the entire company.
A very simple algorithm, such as a manufacturing company in the first quarter of 2003, the cost of goods sold for 2 million dollars, the beginning of the quarter inventory value of 300,000 yuan, the quarter at the end of the inventory value of 500,000 yuan, then the inventory turnover rate of 200/[(30 + 50)/2] = 5 times.
This is equivalent to the business turning over cash an average of $400,000 five times in a quarter, making a profit five times. As usual, if the average cost of materials sold per quarter remains the same.
The average inventory at the end of each quarter is also unchanged, then the annual inventory turnover rate of the enterprise becomes 200 * 4 / 40 = 20 times. This is equivalent to the business using $400,000 of cash to turn a profit 20 times a year!
Significance
Inventory turnover is of great significance to the inventory management of a business. A manufacturer, for example, derives its benefit from the cyclic activity of capital → raw materials → products → sales → capital.
If this cycle is fast, i.e., if the turnover is fast, the rate of interest for the same amount of money is also high. Therefore, the speed of the turnover represents the measurement of the interest of the company, and it is called "inventory turnover ratio".
There is no absolute standard for evaluating inventory turnover, but it is usually compared with other industries or analyzed in comparison with other periods within the enterprise. Inventory performance evaluation and analysis, inventory turnover rate is the focus of evaluation.
Baidu Encyclopedia - Inventory Turnover Days