Number of days' sales in inventory = Inventory / Ave days' cost of goods sold Average days' cost of goods sold = Annual cost of goods sold / 365
Because inventory adds nothing to the numerator of the ratio and the increased liability adds to the denominator, a purchase of inventory on credit will decrease the quick ratio.
inventory
ending inventory
An inventory turn over ratio is the "cost of goods sold" is divided by the "average value" of inventories. This measure shows how hard an investment in inventory is working; the higher the ratio the better. For example, Office Depot increased its inventory turnover ratio from 6.9 in one year to 7.5 the next year which leading to improved annual profits.(Business Week,2004)
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Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory and Average Inventory = ( Beginning Inventory + Ending Inventory ) / 2
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Inventory turnover ratio tells that how many time is inventory is converted into finished goods during one fiscal year.
Because inventory adds nothing to the numerator of the ratio and the increased liability adds to the denominator, a purchase of inventory on credit will decrease the quick ratio.
There is no single ideal ratio.
To calculate the inventory turnover ratio, you need to divide the cost of goods sold by the average inventory. To find the average inventory, add the beginning and ending inventory levels and divide by 2. In this case, the average inventory is (4500 + 5500) / 2 = 5000. The inventory turnover ratio would be 20000 / 5000 = 4.
amount of your assets that are ties up in inventory, Inventory/Assets x 100
inventory
ending inventory
Plant and equipment turnover ratio gives an indication of managment's ability to generate sales based upon investments in plants and equipment. Plant and Equipment Turnover = Sales / Average Total Plant and Equipment Inventories
A finished goods inventory turnover ratio is the rate that the inventory is used over a period of time. This measurement shows a company how it is doing in general. If there is too much inventory, then a company isn't doing that well.
The inventory to assets ratio is found by dividing inventory by total assets. This figure shows how much of a business' net worth is tied up in inventory. A lower ratio reflects more positively on the business.