15. When the cost of sales is divided by the average stock, the result is ______
When the cost of sales is divided by the average stock, the result is
(a)gross profit(b)net profit(c)rate of turnover(d)working capital
What is rate of stock turnover
Rate of stock turnover is also known as Inventory turnover, inventory turns, stock turn, stock turnover
It indicates the rate at which a company sells and replaces its stock of goods during a particular period. i.e how many times a company has sold and replaced inventory during a given period.
Formular
Turnover = cost of goods sold / average stock
Stock turnover rate is considered to be a measure of sales performance; usually the higher the stock turnover rate, the better your stock/business is performing. Calculating Stock turnover rate can help businesses make better decisions on pricing, manufacturing, marketing, and purchasing new inventory.
What Stock turnover rate Can Tell You
Inventory turnover measures how fast a company sells inventory. critical measure of business performance.
A low turnover
implies weak sales
A low turn over may show excess inventory, also known as overstocking.
It may indicate a problem with the goods being offered for sale
indicate the inefficiency of the marketting strategy. (too little marketing)
has an adverse effect on cash flow.
Tie down funds
High stock turnover
implies either strong sales
implies insufficient inventory.
N.B
Your stock turnover rate can help you work out how effectively you are managing your stock. When you review your stock turnover, look for trends such as constantly moving items or items that rarely sell.
You can then stop ordering the items that don't move, which will reduce your costs or make room for new items that might sell better. Items that have a really high stock turnover rate are essentially your best sellers. You could consider ordering more of these items and driving further sales through marketing.
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