How to Calculate Stock Turnover
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Stock turnover ratio is also known as inventory turnover ratio. Stock turnover ratio measures how many times inventory is sold and then replaced in a given period. The period depends on the user, but is normally either monthly, quarterly or yearly.
Stock turnover ratio is important because it will give management and investors an idea of how quickly a firm moves its inventory.
- Stock turnover ratio is also known as inventory turnover ratio.
- Stock turnover ratio is important because it will give management and investors an idea of how quickly a firm moves its inventory.
Determine a company's sales. Company's disclose their sales numbers on the income statement of their financial statements. An analyst can also use cost of goods sold, which is also on the company's income statement.
Determine the company's inventory. The company must disclose their inventory on their balance sheet. An analyst can also use average inventory if using cost of goods sold.
Divide either sales by inventory or cost of goods sold by average inventory to determine stock turnover ratio.
Carter McBride started writing in 2007 with CMBA's IP section. He has written for Bureau of National Affairs, Inc and various websites. He received a CALI Award for The Actual Impact of MasterCard's Initial Public Offering in 2008. McBride is an attorney with a Juris Doctor from Case Western Reserve University and a Master of Science in accounting from the University of Connecticut.