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Financials

Deeper Analysis

OPERATING RATIOS - Asset Utilisation Multiplies

Inventory 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.