Inventory turnover ratio

Why it is necessary to calculate the inventory turnover ratio? This indicator is one of the factors determining the efficiency of the enterprise. For example, to determine the amount of non-standard or obsolete raw material stocks, finished products, materials in the warehouse.

Turnover of production stocks affects profit for a certain cycle. There are no standards accepted as the norm. Each time, indicators are analyzed separately within the activities of a specific enterprise or organization.

If the inventory turnover ratio decreases, it may be due to excessive accumulation of materials or goods in the warehouse. This indicates inefficient management. An increase in the ratio does not always indicate a positive trend. This situation is fraught with stock depletion, which in the worst case threatens to halt the work process.

To calculate the inventory turnover ratio, you can use an online calculator. The indicator primarily reflects the efficiency of the marketing policy of the enterprise or organization. It is important to remember: with a high level of sales profitability, the inventory turnover ratio is lower.