High inventory turnover ratio12/30/2023 ![]() Moreover, using this inventory turnover ratio, your business can also calculate the total time that your company would take to sell out all the inventory that is still present in hand. That is when the calculation of the inventory turnover ratio comes into the picture, which considers the total cost of goods sold and divides it by the number found from the average inventory. However, when it comes to seasonal fluctuation, a common occurrence for a business, the calculation of average inventory falls slightly short of its accuracy. Therefore, using the formula of average inventory, you can understand quite a few things about your business comprehensively. First of all, the average inventory is used to find out the stock in the business or the number that has been emptied before new inventory could be brought upon based on a few months or days. The inventory ratio works in a simple manner. ![]() Read Also: purchasing How Does Inventory Turnover Ratio Work? Using this formula of inventory turnover ratio, your business would be able to find out the actual stock limits on which it has been operating through an end of an accounting year. ![]()
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