How to calculate inventory turnover

How to calculate inventory rotation

Inventory turnover is a key accounting tool that retailers can use to ensure they are managing their store inventory well. In its most basic definition, it is how many times in a given calendar period you sell and trade (trade) your inventory.

The number you get will tell you how fast your products sell. Inventory rotation can help you gauge how your sales strategies affect a retail store’s performance over time. Turnover is also an indicator of the quality of customer service. You will see it when I explain more.

What is the importance of stock trading?

Vendors who manage inventory need to know how fast their products sell and how often they need to replace them. Produttori e grossisti tengono traccia delle loro “code” e i rivenditori dovrebbero fare lo stesso. Producers don’t want to be stuck with a lot of remaining stock at the end of the season. The discounts they apply are the same as you do if you have any remaining stock.

The inventory rotation will help you understand – in concrete numbers – how your current equity strategy works. Are you providing too much? Isn’t there enough supply? Do you keep products that customers don’t want? Do you see great results after a recent product or marketing change?

Also known as “inventory turnover” or “inventory billing”, inventory rotation is a key value in your retail business accounting. When it is used with the rest of the data on your profit & loss sheets, it can give you useful insights into the health of your business. It can also help you make the necessary changes.

It is a good idea to calculate shifts regularly. Whether you keep these numbers annually, seasonally, quarterly or monthly will depend on the size, type and age of your store.

How to calculate inventory turnover

Controlling inventory rotation is the key to keeping your shelves fresh, fresh and keeping cash flow – after all, cash is king in retail. You want to buy goods, transport them quickly, and then buy more products for your customers.

Overall, higher inventory turnover is a good indicator that you are carrying goods, which should mean the business is good. However, if the turnover gets too high, sales may be lost due to limited customer selection.

Obrót zapasów można liczyć zarówno w całości, jak i w podziale na działy lub kategorie towarów. In fact, you should always look at your revenue ratios by department. Some objects spin slower than others.

To calculate inventory turnover, you need to know two numbers: Cost of Goods Sold (COGS) and Average Inventory.

To find your KWS:

COGS = Initial Stock + Purchases – Closing Stock

This should include wholesale inventory costs and any additional costs such as shipping and handling that you paid for. Also, be sure to subtract the cost of any scrapped or lost items.

To find your medium assortment:

Average stocks = opening stocks + closing stocks / 2

The inventory values ​​should be found in the company’s balance sheet for each accounting period.

To calculate inventory turnover:

Stock Turnover = COG / Average Stocks

The result obtained will give you a stock turnover ratio. If you divide this by the number of days used in the billing period, you will get the average number of days you have held your inventory.

Days in stock = days in the accounting period / inventory turnover report

Inventory turnover calculation example

We use a series of easy fictitious sales numbers to put these calculations into perspective.

  • Opening inventory: $ 10,000
  • Inventory close: $ 20,000
  • Additional Purchases: $ 50,000
  • Number of days in the period: 90
Cost of goods sold $ 10,000 + $ 50,000 – $ 20,000 = 40,000 PLN
Average stocks $ 10,000 + $ 20,000 / 2 = $ 15,000
Inventory turnover ratio $ 40,000 / $ 15,000 = 2.67
Average number of days in stock 90 / 2.67 = 33.7

In this example, a seller held inventory for an average of 33 days over a 90-day period. They fall out about once a month. Is that a good spin speed? It all depends on your assets.

One of the best practices for retailers is to join a trade association where they can compare numbers and results with similar retailers. In other words, compare your shifts with another shoe store (because you also sell shoes) versus a sporting goods store.

What is stock trading?

Inventory rotation is the rate at which a company replenishes inventory during a given period as a result of sales. The inventory turnover calculation helps companies make better decisions on pricing, production, marketing and purchasing. Well-managed inventory levels show that the company’s sales are at the desired level and that costs are under control. Inventory turnover ratio jest miarą tego, jak dobrze firma generuje sprzedaż ze swoich zapasów.

Key takeaway:

  • The inventory includes all the items that the company has in stock that will eventually be sold.
  • Inventory turnover indicates how quickly a company sells and replaces its inventory of goods over a period of time.
  • The formula for the inventory turnover ratio is the cost of goods sold divided by the average inventory for the same period.

Read the inventory round

Understanding inventory trading

Inventario è un elenco di tutti gli articoli che un’azienda ha nel proprio inventario, comprese le materie prime, i lavori in corso e i prodotti finiti che verranno eventualmente venduti. Inventory typically includes finished goods such as clothing in a department store.

However, stocks can also include raw materials used to produce finished products. For example, a clothing manufacturer would consider an inventory of the fabric used to produce the garment.

Inventory turnover is the number of sales and exchanges of goods by a company during a given period. As such, inventory rotation reflects how a company manages the costs associated with its sales activities.

  • The higher the inventory turnover, the betterbecause high inventory turnover usually means a business sells goods quickly and there is high demand for their products.
  • Low inventory turnover,on the other hand, they would likely indicate weaker sales and falling demand for the company’s products.
  • Inventory rotation indicates how well a company manages its inventory. The company may overestimate the demand for its products and buy too many goods. This would turn out to be low turnover. Conversely, if inventory turnover is high, it means there is insufficient inventory and the company is missing out on sales opportunities.
  • The inventory rotation also shows whether the company’s sales and purchasing departments are in sync. Ideally, your inventory should match your sales. It can be costly for companies to hold onto inventory that isn’t selling. Therefore, inventory rotation indicates sales effectiveness and operational cost management. Alternatively, for a certain amount of sales, using fewer inventory improves inventory rotation.

Calculation of inventory turnover

As with the typical turnover rate, inventory rotation determines the amount of inventory sold during a given period. To calculate the inventory turnover ratio, the cost of goods sold (COGS) is divided by the average inventory for the same period. .

  • Inventory turnover ratio = Cost Of Goods Sold ÷ Average stocks

Average stocks are used for the index as companies can have higher or lower stock levels at certain times of the year. For example, retailers like Best Buy Co. Inc. (BBY) would likely have higher pre-holiday inventory in the fourth quarter and lower inventory in the first quarter after Christmas.

COGS is a measure of a company’s cost of producing goods and services. Production costs can include the cost of materials, labor costs directly related to the goods produced, and any general or fixed factory costs that are used directly in the production of the goods.

Inventory sales days or inventory days

Inventory Sale Days (DSI) measures how many days it takes for an inventory to turn into a sale. The DSI is calculated by taking the reciprocal of the inventory turnover ratio multiplied by 365. This produces the result in a daily context as follows:

  • DSI = (Average stocks ÷ COGS) x 365

A lower DSI is ideal as it would mean fewer days needed to convert your inventory into cash. However, the DSI values ​​may vary by industry. Consequently, it is important to compare a company’s DSI with its competitors. For example, grocery companies like Kroger (KR) supermarkets have fewer days of inventory than auto sellers like General Motors (GM).

Inventory turnover calculation example

W roku podatkowym 2019 Walmart Stores (WMT) odnotował roczną sprzedaż w wysokości 514,4 mld USD, zapasy na koniec roku w wysokości 44,3 mld USD, początkowe zapasy w wysokości 43,8 mld USD i roczne koszty zakupu w wysokości 385,3 mld USD..

Walmartinventory rotationfor the year was:

  • USD 385.3 billion ÷ (USD 44.3 billion + USD 43.8 billion) / 2 =8.75

Hisdaily inventoryIt’s equal to:

  • (1 ÷ 8.75) x 365 =42 days

Wskazuje to, że Walmart sprzedaje cały swój zapas w ciągu 42 days, co jest imponujące jak na tak dużego, globalnego detalistę.

Special Notes

The inventory rotation ratio is an effective measure of how well a company is turning its inventory into sales. The indicator also shows how management is managing the costs associated with inventory and whether it is buying too much or not enough inventory.

Additionally, inventory rotation shows how well the company sells its goods. If sales are down or the economy is under-performing, it may manifest as a lower inventory rotation ratio. Usually, a higher inventory rotation ratio is preferable because it indicates that more sales are generated from a certain amount of inventory.

Sometimes, a high inventory ratio can result in a loss of sales because inventory is insufficient to meet demand. The inventory rotation ratio should be compared to the industry benchmark to assess if a company is successfully managing its inventory.

How to Calculate the Inventory turnover ratio

How to calculate inventory rotation

The inventory rotation ratio is a formula that makes it easy to figure out how long it takes for a business to sell through its entire inventory. A higher inventory rotation ratio usually indicates that a business has strong sales compared to a company with a lower inventory rotation ratio.

Learn how to calculate this metric and how to use it to analyze your business.

What Is the Inventory turnover ratio?

The inventory rotation ratio is a straightforward method for determining how often a company turns over its inventory in a specified period of time. It is also known as “Inventory Returns”. This formula gives you an idea of ​​your company’s performance in converting its cash into sales and profits.

The inventory rotation ratio is an example of an efficiency ratio.

How Do You Calculate the Inventory turnover ratio?

The first step in calculating the inventory rotation ratio is to choose a timeframe to measure (eg, a quarter or a fiscal year). Then find the average inventory for that period by averaging the closing and starting inventory costs for that time period. Once you have a time frame and average inventory, simply divide the cost of goods sold (COGS) by the average inventory.

How to calculate inventory rotation

How the Inventory turnover ratio Works

You can save yourself a lot of trouble when assessing inventory rotation ratios by acquiring a company’s balance sheet and income statement. I COGS sono solitamente elencati nel conto economico e i saldi di magazzino sono nel bilancio. In these two documents, you plug the numbers into a simple quotient formula and that’s it.

When comparing the data to other analysts, note that some analysts use total annual sales rather than the cost of goods sold. This is largely the same equation, but it includes a company’s mark-up, so it could lead to a different result than equations that use the cost of goods sold. Not necessarily one is better than the other, but it’s important to be consistent with your comparisons. Using annual sales to calculate an index for one company, while using the cost of goods sold to another company, gives you no real understanding of the comparison between the two companies.

Example

Consider this real world example. Coca-Cola’s 2017 profit and loss account showed KWS was $ 13.256 million and the average inventory value for 2016-2017 was $ 2.665 million. We can use these numbers to calculate the ratio:

  • Inventory Turnover = COG / Average Inventory
  • Inventory Turnover = $ 13.256 million / $ 2.665 million
  • Inventory turnover = 4,974

Now you know that Coca-Cola’s turnover this year was 4,974. You can compare this attitude with others in the soft drink and snack industry to understand how well Coca-Cola is doing. Jeśli, na przykład, dowiedziałbyś się, że inventory rotation konkurenta wyniosła 8,4, oznaczałoby to, że konkurent sprzedaje produkt szybciej niż Coca-Cola.

There are many reasons why a company may have lower inventory turnover than another, this does not necessarily mean that one company is worse than the other. To get the full picture, it is important to read the company’s financial statements and accompanying disclosures. Although Coca-Cola’s inventory turnover ratio was lower, you might find other indicators that show it was still financially stronger than other industry averages. Useful context can also be provided by using historical data to compare current years with previous years.

In general, the more a company’s assets are tied to inventory, the more a company depends on faster turnover.

Inventory trading days

Puoi fare un ulteriore passo avanti nella tua analisi dell’inventario utilizzando il rapporto di inventory rotation per calcolare il numero di giorni necessari alla tua attività per svuotare l’inventario.

Continue with the Coca-Cola example, which provided an inventory rotation ratio of 4.974. Divide 365 by that number of inventory turns, the result should be 73.38. This means that it took an average of 73.38 days to sell the Coca-Cola stock. This places the company’s performance in a different context. Calculating the inventory rotation days doesn’t necessarily provide any new information, but framing the same information in terms of days is helpful for some analysts.

Limitations of the Inventory turnover ratio

The time it takes a company to sell inventory can vary greatly from sector to sector, so unless you know the average inventory turnover for a given sector, the formula won’t be very helpful in your analysis.

For example, retail stores and grocery chains tend to have much higher inventory turnover rates because they sell cheaper and perishable products. As a result, these companies require a lot more managerial diligence. On the other hand, companies that manufacture heavy machinery such as airplanes will have a much lower turnover rate. It takes a long time to manufacture and sell an aircraft, but it often earns the company millions of dollars once the sale is complete.

How to calculate inventory rotation

Inventory turnover is a key accounting tool that retailers can use to ensure they are managing their store inventory well. In its most basic definition, it is how many times in a given calendar period you sell and trade (trade) your inventory.

The number you get will tell you how fast your products sell. Inventory rotation can help you gauge how your sales strategies affect a retail store’s performance over time. Turnover is also an indicator of the quality of customer service. You will see it when I explain more.

What is the importance of stock trading?

Vendors who manage inventory need to know how fast their products sell and how often they need to replace them. Produttori e grossisti tengono traccia delle loro “code” e i rivenditori dovrebbero fare lo stesso. Producers don’t want to be stuck with a lot of remaining stock at the end of the season. The discounts they apply are the same as you do if you have any remaining stock.

The inventory rotation will help you understand – in concrete numbers – how your current equity strategy works. Are you providing too much? Isn’t there enough supply? Do you keep products that customers don’t want? Do you see great results after a recent product or marketing change?

Also known as “inventory turnover” or “inventory billing”, inventory rotation is a key value in your retail business accounting. When it is used with the rest of the data on your profit & loss sheets, it can give you useful insights into the health of your business. It can also help you make the necessary changes.

It is a good idea to calculate shifts regularly. Whether you keep these numbers annually, seasonally, quarterly or monthly will depend on the size, type and age of your store.

How to calculate inventory turnover

Controlling inventory rotation is the key to keeping your shelves fresh, fresh and keeping cash flow – after all, cash is king in retail. You want to buy goods, transport them quickly, and then buy more products for your customers.

Overall, higher inventory turnover is a good indicator that you are carrying goods, which should mean the business is good. However, if the turnover gets too high, sales may be lost due to limited customer selection.

Obrót zapasów można liczyć zarówno w całości, jak i w podziale na działy lub kategorie towarów. In fact, you should always look at your revenue ratios by department. Some objects spin slower than others.

To calculate inventory turnover, you need to know two numbers: Cost of Goods Sold (COGS) and Average Inventory.

To find your KWS:

COGS = Initial Stock + Purchases – Closing Stock

This should include wholesale inventory costs and any additional costs such as shipping and handling that you paid for. Also, be sure to subtract the cost of any scrapped or lost items.

To find your medium assortment:

Average stocks = opening stocks + closing stocks / 2

The inventory values ​​should be found in the company’s balance sheet for each accounting period.

To calculate inventory turnover:

Stock Turnover = COG / Average Stocks

The result obtained will give you a stock turnover ratio. If you divide this by the number of days used in the billing period, you will get the average number of days you have held your inventory.

Days in stock = days in the accounting period / inventory turnover report

Inventory turnover calculation example

We use a series of easy fictitious sales numbers to put these calculations into perspective.

  • Opening inventory: $ 10,000
  • Inventory close: $ 20,000
  • Additional Purchases: $ 50,000
  • Number of days in the period: 90
Cost of goods sold $ 10,000 + $ 50,000 – $ 20,000 = 40,000 PLN
Average stocks $ 10,000 + $ 20,000 / 2 = $ 15,000
Inventory turnover ratio $ 40,000 / $ 15,000 = 2.67
Average number of days in stock 90 / 2.67 = 33.7

In this example, a seller held inventory for an average of 33 days over a 90-day period. They fall out about once a month. Is that a good spin speed? It all depends on your assets.

One of the best practices for retailers is to join a trade association where they can compare numbers and results with similar retailers. In other words, compare your shifts with another shoe store (because you also sell shoes) versus a sporting goods store.

Inventory turnover is an indicator of how many times a company has sold and changed inventory over a period of time. A company can then divide the days in the period by the inventory rotation formula to calculate the days it takes to sell the inventory on hand. Calculating inventory rotation can help businesses make better decisions on pricing, manufacturing, marketing, and purchasing new inventory.

Stock rotation is calculated as follows:

The Jonicka company
Comparative income statement
For the financial years closed on 31 December 2019 and 2018

Description 2019 2018
Turnover $ 994,000 $ 828,000
The cost of the goods sold 414,000 393,000
Gross profit A single line of $ 580,000 A single line of $ 435,000
The Jonicka company
Comparative equilibrium
December 31, 2019 and 2018

2019 2018
Resources
subcategory,Resources obrotowe:
Cash $ 373,000 $ 331,000
Transferable securities 248,000 215,000
Credits 108,000 91,000
Inventory of goods 55,000 48,000
Prepaid Insurance 127,000 115,000
Resources obrotowe ogółem A single line of $ 911,000 A single line of $ 800,000

The more often the inventory is sold, the more money the company generates to pay off bills and debts. Inventory turnover is also a measure of a firm’s operational performance. If the company’s line of business is to sell merchandise, the more often it does so, the more operationally successful it is.

La inventory rotation mostra quanto velocemente un’azienda può vendere il proprio inventario, misurando tale velocità in base al numero di volte all’anno in cui l’inventario teoricamente crolla completamente. Of course, the articles will vary. For example, in the supermarket, milk spins relatively fast (hopefully), while Christmas cards can spin much slower.

Meanwhile, Inventory Days (DSI) determine the average time it takes a company to turn its inventory into sales. DSI is essentially the inverse of inventory rotation for a given period—calculated as (Average stocks / COGS) x 365. Basically, DSI is the number of days it takes to turn inventory into sales, while inventory rotation determines how many times in a year inventory is sold or used.

It’s a relatively simple calculation. Just take the number of days in a year and divide that by the inventory rotation.

In our example, an inventory rotation of 8 times per year translates to 45.6 days (365/8).

What is the Inventory turnover ratio?

The inventory rotation ratio, also known as the stock turnover ratio, is an efficiency ratio that measures how efficiently inventory Inventory Inventory is a current asset account found on the balance sheet, consisting of all raw materials, work-in-progress, and finished goods that a is managed. The inventory rotation ratio formula is equal to the cost of goods sold Cost of goods sold (COGS) Cost of goods sold (COGS) measures the “direct cost” incurred in the production of any goods or services. It includes the cost of the material, divided directly by the total or average inventory to show how many times the inventory is delivered or sold in a given period. The factor can be used to determine if there are inventory levels in excess of sales.

Inventory turnover ratio Formula

The formula for calculating the index is as follows:

  • Cost of goods sold is the cost that is assigned to the production of the goods sold by the firm during the specified period. The cost of goods sold by a company can found on the company’s income statement Income Statement The Income Statement is one of a company’s core financial statements that shows their profit and loss over a period of time. Profit or.
  • Average stocksis the average value of the shares over a given period.Note: The analyst can use end-of-period averages or stock values.

Practical Example of Inventory turnover ratio

For example, Walmart Inc. (WMT) and Target Corporation have reported the following in their financial statements:

How to calculate inventory rotation

How to calculate inventory rotation

The factor for Walmart is calculated as follows:

Similarly, the ratio for a Target is calculated as follows:

By comparing the inventory rotation ratios of Walmart and Target, two companies that operate mainly in the retail industry, we can see that Walmart sells its inventory 8.26x over a period of one year compared to Target’s 5.54x. This means Walmart is able to sell the inventory it buys more efficiently. Additionally, it could indicate that Walmart is not overspending on inventory purchases and is not incurring high stocking and warehousing costs compared to Target.

Interpretation of Inventory turnover ratio

Inventory turnover ratio to wskaźnik wydajności, który mierzy, jak dobrze firma może zarządzać swoimi zapasami. Achieving high speed is important as higher rotation speeds reduce storage costs and other storage costs. It is important to compare the indicators between companies operating in the same sector and not companies operating in different sectors. The benchmark indicator varies considerably from sector to sector.

Low turnover implies that a company’s sales are poor, it is carrying too much inventory, or experiencing poor inventory management. Unsold shares can be exposed to significant risks due to the volatility and obsolescence of market prices.

Depending on the industry in which the company operates, inventory can help determine its liquidity. For example, inventory is one of the largest inventory reported by sellers. If a retail company reports a low inventory rotation ratio, the inventory may be obsolete for the company, resulting in lost sales and additional holding costs.

Key takeaway

  • Inventory turnover ratio to wskaźnik wydajności, który mierzy efektywność zarządzania zapasami.
  • The ratio should only be compared for companies operating in the same sector, as the ratio varies greatly from sector to sector.
  • A high rate is always beneficial as it indicates lower storage costs and other storage costs.
  • A low ratio means poor sales, excessive inventory, or ineffective inventory management.
  • Depending on the sector, the indicator can be used to determine the liquidity of the company.

More resources

CFI offers the Financial Modeling & Valuation Analyst (FMVA)™ FMVA® Certification Join 850,000+ students who work for companies like Amazon, J. P. Morgan, and Ferrari How to calculate inventory rotationa certification program for people who want to take their career to the next level. To continue your education and career advancement, the following CFI resources will be helpful:

  • Days past due (DIO) Days past due (DIO) are the average number of days a company holds inventory before selling it. The daily inventory
  • Day Turnover Outstanding (DSO) Days Turnover Outstanding (DSO) Days Turnover Outstanding (DSO) represents the average number of days it takes credit sales to be converted into cash, or how long it takes a
  • Benchmarking the company Benchmarking the company How to conduct a benchmarking company. This guide shows you step-by-step how to build a business benchmark (“Comps”), includes a free template and many examples. Comps is a relative valuation methodology that analyzes the metrics of similar public companies and uses them to determine the value of another company
  • Glossary of financial analysis indicators Glossary of financial analysis indicators Glossary of terms and definitions of common terms related to financial analysis indicators. It is important to understand these important terms.

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How to calculate inventory rotation

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How to calculate inventory rotation

Updated: November 4, 2019

The automotive industry has changed a lot in recent years. People don’t shop for cars the same way they did a few years ago, and dealerships don’t sell cars the same way (or at least they shouldn’t). Dealers have also changed the way they make business decisions.

You and your sales managers probably spend a lot of time considering your inventory rotation . You’re looking at annual inventory turn, quarterly, monthly. Perhaps even in a shorter time, and this applies to new and used vehicles.

And when you look at inventory rotation, you may be wondering “How can I improve my merchandising and inventory turns?”

But that’s jumping ahead. Right now, you are asking yourself, “How should I calculate my inventory rotation ratio?”

How to Find Your Inventory turnover ratio

Given that it’s expressed as a ratio, finding your inventory rotation is a matter of doing some basic math. The ratio is typically used to help you understand the number of times your inventory fully turns over in a year, said differently it’s the number of times you would need to purchase the average inventory you hold per year. The basic equation is below.

Inventory turnover ratio = Cost of goods sold / Average stocks Value

Don’t know your Cost of goods sold or Average stocks Value? Help is here. In automotive, your Cost of goods sold, may be labeled “Cost of Turnover” on financial documents in dealerships.

Cost of goods sold

Your Cost of goods sold or Cost of Turnover is the total value of all the inventory you sold in the given period. In many showrooms, incl Cost of Turnover the number may have already been calculated for you. If it’s not, take your Retail Turnover for the time period, minus your front-end retail gross and that equals your Cost of Turnover.

Your Total Retail Turnover-Front End Retail Gross = Cost of Turnover

Another way to calculate your Cost of goods sold, is to add the total value of your beginning inventory, plus inventory purchased and subtract any inventory that remains to be sold. See the formula below.

Cost of goods sold = Beginning Inventory Value + Value of Any Inventory Purchased during the period – Ending Inventory Value

If you are trying to look at Cost of goods sold for a full year using this method, you can take the beginning inventory value one year ago, add the value of all new inventory received during the year, subtract the value of your current inventory left on the lot to get the cost of goods sold over the last 12 months.

Now that you have a Cost of Turnover, also known as Cost of goods sold value you are ready to calculate the Average stocks Value.

Average stocks Value

To get your Average stocks Value just add the end of month inventory value number for the last 12 months and divide by 12. The general formula for Average stocks Value is:

Average stocks Value = (Sum of Inventory Values for Time Period / number of Values).

If you want to see how your most recent month is tracking, you can simply take the beginning inventory value of the most recent complete month plus the ending inventory value of that month divide by two or use the calculator below to get your most recent Average stocks Value.

Include that most recent Average stocks Value in the calculator above for Inventory turnover ratio. If your Inventory turnover ratio increased with your most recent Average stocks Value that’s a good sign that you are on a positive track.

Now that you have everything you need to calculate your Inventory turnover ratio you can also use that to calculate your Days’ Turnover of Inventory or the number of days it takes to sell a given inventory. The formula for this is as follows:

Days’ Turnover of Inventory = 365 / Inventory turnover ratio

What’s a Good Inventory turnover ratio?

Turn Ratio Inventory should be considered as part of your overall scorecard, including profitability. While each dealer will have a number that works for him, 12 rounds or holding stocks for 30 days is the gold standard. Special vehicles may take fewer shifts, while dealerships with more shifts may be able to maintain a higher shift. Jasen Rice, the owner of Lotpop, sums it up simply: “Sell what you wear and wear what you sell”.

Inventory transfer with better merchandising

One of the strongest levers to help you sell your inventory is making sure your vehicles are visible and operational. From MAX BDC to MAX Ad & Syndication and MAX Digital Showroom, MAX can help you merchandise and share all the value of your vehicles to get more customers in store. Contact MAX Digital today to schedule a demonstration of one of our solutions.

In the meantime, good luck with these numbers.

MAX Digital’s automotive software suite has what you need to reach today’s modern car buyer. MAX BDC creates a collaborative experience for your BDC team, sales team and customer. Schedule a demo today to see this industry-leading automotive BDC tool that makes your reps instant expert, satisfaction on a call, and in-store success.

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Inventory turnover is an indicator of how many times a company has sold and changed inventory over a period of time. A company can then divide the days in the period by the inventory rotation formula to calculate the days it takes to sell the inventory on hand. Calculating inventory rotation can help businesses make better decisions on pricing, manufacturing, marketing, and purchasing new inventory.

Stock rotation is calculated as follows:

The Jonicka company
Comparative income statement
For the financial years closed on 31 December 2019 and 2018

Description 2019 2018
Turnover $ 994,000 $ 828,000
The cost of the goods sold 414,000 393,000
Gross profit A single line of $ 580,000 A single line of $ 435,000
The Jonicka company
Comparative equilibrium
December 31, 2019 and 2018

2019 2018
Resources
subcategory,Resources obrotowe:
Cash $ 373,000 $ 331,000
Transferable securities 248,000 215,000
Credits 108,000 91,000
Inventory of goods 55,000 48,000
Prepaid Insurance 127,000 115,000
Resources obrotowe ogółem A single line of $ 911,000 A single line of $ 800,000

The more often the inventory is sold, the more money the company generates to pay off bills and debts. Inventory turnover is also a measure of a firm’s operational performance. If the company’s line of business is to sell merchandise, the more often it does so, the more operationally successful it is.

La inventory rotation mostra quanto velocemente un’azienda può vendere il proprio inventario, misurando tale velocità in base al numero di volte all’anno in cui l’inventario teoricamente crolla completamente. Of course, the articles will vary. For example, in the supermarket, milk spins relatively fast (hopefully), while Christmas cards can spin much slower.

Meanwhile, Inventory Days (DSI) determine the average time it takes a company to turn its inventory into sales. DSI is essentially the inverse of inventory rotation for a given period—calculated as (Average stocks / COGS) x 365. Basically, DSI is the number of days it takes to turn inventory into sales, while inventory rotation determines how many times in a year inventory is sold or used.

It’s a relatively simple calculation. Just take the number of days in a year and divide that by the inventory rotation.

In our example, an inventory rotation of 8 times per year translates to 45.6 days (365/8).