![]() ![]() Knowing your inventory turnover ratio additionally allows for a better understanding of cash-flow management, through inventory optimization, and decisions dealing with pricing and purchasing.Ĭonsider a retail outlet stocking a wide array of trendy, fast-fashion items. This financial ratio allows a company to calculate how long it may take, on average, to sell its inventory.Īs previously mentioned, the main benefit of knowing your company’s inventory turnover ratio allows for more effective inventory management strategies to be implemented, as the ratio will assist in highlighting weak points within the current inventory management system. The inventory turnover ratio, or a business’ inventory turnover, refers specifically to the number of times a business has sold and replaced its stock within a given period. This article will explore the uses of the inventory turnover ratio, by looking at the factors that affect it and how to implement the ratio calculation. ![]() The way in which this is usually calculated is by using the inventory turnover ratio. This helps businesses assess the efficiency of their inventory management, demand forecasting, and marketing strategies, allowing them to make any necessary adjustments to improve their sales. It is imperative to the system of operations that businesses take note of what stock is selling and how quickly it is selling. ![]()
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