All types of business entities require the aesthetic help of inventory turnovers because they act as track inventory in terms of finding out how many times the items of a specific business is sold and replaced in a certain span of time. The span of time would either be in 6 months to a year.
Inventory turnover requires an equation on how to calculate inventory turnover, and the formula of inventory turnover = cost of goods sold divided by average inventory. Other terms for inventory turnover are inventory turns, stock turns, stock turnover turns, and merchandise turnover.
In some companies, inventories are often expressed “in days or weeks in supply,” therefore producing good and intelligible values providing immediate comparisons, which are considered to be very vital in the business inventory. So if you are planning to analyze inventory turnovers, free inventory templates can help you or try and consider the following elements:
There have been limits set on inventory turnovers, fluctuations do not necessarily and immediately reflect within the year.
Improvement of Inventory Turnover
In improving inventory turnovers, specific levelers are involved in the process of its improvement and they are the following:
It is normal for a business to have high and sometimes low returns, but even when it is considered to be mundane, there has to be actions and solutions needed to alleviate and prevent from getting low returns in the future.
When there is a decrease in inventory, it means that the cash is not converted as quickly as possible. Furthermore, the products are held by the company for so long, which determines that the product is not demanded by consumers as what’s expected by producers. It comes with utter necessity for a company to highlight this matter for the future prosperity of it.