Inventory turnover
factor.formula
Inventory turnover rate calculation formula:
Average inventory calculation formula:
in:
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Refers to the total operating costs for the trailing twelve months (TTM). Operating costs include direct materials, direct labor, and manufacturing overhead, etc., representing the direct costs incurred to produce and sell goods. Using TTM data can smooth seasonal fluctuations and more accurately reflect the operating conditions of a company over a period of time.
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Refers to the inventory amount at the beginning of the reporting period. Inventory includes raw materials, work-in-progress and finished goods. The beginning inventory is the basis for calculating the average inventory of the period.
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Refers to the amount of inventory at the end of the reporting period. Ending inventory is used together with beginning inventory to calculate average inventory, reflecting the overall change in inventory levels during the reporting period.
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Refers to the average inventory amount during the reporting period, which is the arithmetic mean of the beginning inventory and the ending inventory. Using average inventory instead of ending inventory can more accurately reflect the inventory level throughout the reporting period and reduce the deviation caused by abnormal ending inventory.
factor.explanation
Inventory turnover rate represents the number of times inventory is converted into sales in a certain period of time. A higher inventory turnover rate means that the company has efficient inventory management, strong sales capabilities, and fast capital turnover, which can effectively reduce the risk of inventory backlogs and improve capital utilization efficiency and profitability. This indicator not only reflects the company's operating efficiency, but also reflects the market demand for the company's products. Comparison within the industry helps to evaluate the company's competitiveness and operating level, while trend analysis can monitor changes in the company's operating efficiency. However, too high a turnover rate may also mean insufficient inventory, affecting sales opportunities. Therefore, when analyzing this indicator, it is necessary to combine industry characteristics and the specific situation of the company for comprehensive consideration.