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Retail & Allocation lesson

Inventory turnover

Turnover shows how many times the stock sold and was replaced in the month. Both numbers are at cost.

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About 5–10 minutes · no sign-up needed

The idea

Turnover shows how many times the stock sold and was replaced in the month. Both numbers are at cost:

Formulas

Cost of goods ÷ Avg inventory

Key points

Inventory turnoverHow many times the average stock sold through in the period.
Work it outDivide the cost of goods sold by average inventory, both at cost.
Read itHigher turns mean less cash tied up. Very high can mean empty shelves. Never mix cost and retail in one ratio.

Turnover compares cost with cost. Never mix retail prices with cost prices in one ratio.

Practice

Try each one in your head first, then open the answer.

1. In D2, work out Audio's stock turnover: cost of goods ÷ average inventory.
=B2/C2
2. What is inventory turnover for Cases this month?
$8,000 ÷ $4,000 = 2.0 turns
3. Tap the category with the lowest turnover: its stock is selling through slowest.
Screen guards turned only half a time this month.
4. Screen guards' stock turns over only 0.5 times a month. What's the risk?
Cash is tied up in stock that isn't selling

Learn it by doing. This lesson is a short hands-on level on Bampaa: see it work, then build and write it yourself, with instant feedback.

Try this lesson free →
About 5–10 minutes · no sign-up needed