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Basic ADVFN Video Help
ADVFN HomeHelpFinancialsDeeper AnalysisOPERATING RATIOS - Asset Utilisation MultipliesInventory Turnover
OPERATING RATIOS - Asset Utilisation Multiplies
  Shareholders Equity Turnover
  Fixed Assets Turnover
  Current Assets Turnover
  Net Working Capital Turnover
  Inventory Turnover

Inventory Turnover

Inventory Turnover ratio, is simply the turnover of the company divided by its stocks. The formula is the following:

= turnover / average stocks

It should always be compared against the average price of the ratio for the sector.
A low Inventory Turnover suggest poor sales and/or high investment in inventory - which is non-profitable and risky.
A high ratio implies either strong sales or ineffective buying.

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