In another variation of this ratio calculation, the numerator does not reflect the cost of goods sold but uses the sales value instead. In the first option, when determining the inventory turnover, the numerator used the cost of goods sold, while the average value of the inventory for the analyzed period serves as a denominator. There are two options for calculating this ratio: optimize spendings on payment for labor resources engaged in the processing, delivery, and storage of inventory.reduce the amount of ineffective and unused goods and materials.reduce the cost of maintaining storage facilities to ensure the safety of surplus goods.reduce the number of expired inventory items written off.optimize goods and raw materials sitting in warehouses.eliminate interruptions in the supply of materials required for production.The analysis of inventory turnover will allow to: This will make it possible to determine your place in comparison with the enterprises of the industry as a whole. Calculate the value of the ratio for the industry on average, as well as highlight a leading company by the ratio. This will allow you to determine the trend of its change. Calculate the values of the ratio for your enterprise for several periods and build a time series of its changes. It can be analyzed using the following methods: The ratio does not have a specific standard value. In other words, this ratio is used to find out how many times a business replaces its inventory over a specific period. Stock (inventory) turnover ratio is used to measure how quickly the stock is converted into sales. Accordingly, keeping track of the inventory turnover rate is an important management function. If the inventory is not used up by business operations at a reasonable rate, the company will find itself in a situation where a significant portion of its cash will be invested in an asset that is difficult to liquidate in a short time. Inventories are those things the business holds in order to enable it to produce as well as to trade. Inventory is often the largest portion of working capital.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |