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In accounting, the inventory turnover is a measure of the number of times inventory is sold or used in a time period such as a year. It is calculated to see if a business has an excessive inventory in comparison to its sales level. The equation for inventory turnover equals the cost of goods sold divided by the average inventory.
The formula for days in inventory is: = /, alternatively expressed as: = ′ , [2] where DII is days in inventory and COGS is cost of goods sold. The average inventory is the average of inventory levels at the beginning and end of an accounting period, and COGS/day is calculated by dividing the total cost of goods sold per year by the number of ...
Inventory turnover ratio (also known as inventory turns) = cost of goods sold / Average Inventory = Cost of Goods Sold / ((Beginning Inventory + Ending Inventory) / 2) and its inverse Average Days to Sell Inventory = Number of Days a Year / Inventory Turnover Ratio = 365 days a year / Inventory Turnover Ratio. This ratio estimates how many ...
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Learn what asset turnover ratio is, the formula, how to calculate it and how it measures a company's efficiency in generating revenue from its assets.
Liquidity ratios measure the availability of cash to pay debt. [3] Efficiency (activity) ratios measure how quickly a firm converts non-cash assets to cash assets. [4] Debt ratios measure the firm's ability to repay long-term debt. [5] Market ratios measure investor response to owning a company's stock and also the cost of issuing stock. [6]
An example illustrates why. Fred buys auto parts and resells them. In 2008, Fred buys $100 worth of parts. He sells parts for $80 that he bought for $30, and has $70 worth of parts left. In 2009, he sells the remainder of the parts for $180. If he keeps track of inventory, his profit in 2008 is $50, and his profit in 2009 is $110, or $160 in total.
Fixed-asset turnover; Long-term liabilities. Debt-to-equity ratio; Debt-to-capital ratio; Working capital. Current asset; Current liability; Inventory turnover / Days in inventory; Cost of goods sold; Debtor & Creditor days; Days sales outstanding; Days payable outstanding