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STOCK T

Calculation method a

25%th percentile

Raw material stock

WIP - Work in process
Finished goods stock
Total inventory

5
7.5
6
4

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

Raw material st
WIP - Work in
process
Finished goods
stock
Total inventory

25.00
20.00
15.00
10.00
5.00
0.00
25%th percentile

Body Mass Index

Median

75% percentile

SUM of slow moving stock
Total Inventory

Median

75% percentile

10
15.6
12
7

18
40.3
24
13.1

unt of average stock at cost.

e inventory at cost]

Generally, the cost of goods sold may not be known from the publi
circumstances, the inventory turnover ratio may be calculated by d
cost. If average inventory at cost is not known then inventory at se
and where the opening inventory is also not known the closing inv
inventory.

(b) [Inventory Turnover Ratio = Net Sales / Average Invent

(c) [Inventory Turnover Ratio = Net Sales / Average invento
(d) [Inventory Turnover Ratio = Net Sales / Inventory]
Raw material stock
WIP - Work in
process
Finished goods
stock
Total inventory

Significance of Inventory Turnover Ratio:

Inventory turnover ratio measures the velocity of conversion of sto
turnover/stock velocity indicates efficient management of inventor
sold, the lesser amount of money is required to finance the invento
an inefficient management of inventory. A low inventory turnover i
business, poor quality of goods, stock accumulation, accumulation
profits as compared to total investment. The inventory turnover ra
high ratio signifies more profit, a low ratio signifies low profit. Som
not be accompanied by relatively a high profits. Similarly a high tu
in inventories.

Source: http://www.accountingformanagement.com/stock_turn_ove

Definition: No movement in stock in 12 month

Definition: Stock larger than 24 months of sale
Definition: Total inventory

ULATION
Calculation method b + c + d

Net sales

Average inventory at cost

Average inventory at selling price
Total inventory

0
0
0

y, the cost of goods sold may not be known from the published financial statements. In such
ances, the inventory turnover ratio may be calculated by dividing net sales by average inventory at
verage inventory at cost is not known then inventory at selling price may be taken as the denominator
re the opening inventory is also not known the closing inventory figure may be taken as the average
y.

ventory Turnover Ratio = Net Sales / Average Inventory at Cost]

ventory Turnover Ratio = Net Sales / Average inventory at Selling Price]
ventory Turnover Ratio = Net Sales / Inventory]

ance of Inventory Turnover Ratio:

y turnover ratio measures the velocity of conversion of stock into sales. Usually a high inventory
/stock velocity indicates efficient management of inventory because more frequently the stocks are
lesser amount of money is required to finance the inventory. A low inventory turnover ratio indicates
cient management of inventory. A low inventory turnover implies over-investment in inventories, dull
, poor quality of goods, stock accumulation, accumulation of obsolete and slow moving goods and low
s compared to total investment. The inventory turnover ratio is also an index of profitability, where a
o signifies more profit, a low ratio signifies low profit. Sometimes, a high inventory turnover ratio may
ccompanied by relatively a high profits. Similarly a high turnover ratio may be due to under-investment
tories.

http://www.accountingformanagement.com/stock_turn_over_ratio.htm

0
0
0
0

h
entory at
enominator
e average

ntory
ocks are
o indicates
ories, dull
ds and low
, where a
ratio may
-investment

ody Mass Index

<5%

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