| STR |
| Stock Turnover Rate |
The stock turnover rate, also known as inventory turnover or stock turnover ratio, is a financial ratio that measures how quickly a company is selling its inventory. |
| It is typically used to evaluate a company's efficiency and effectiveness in managing its inventory, and to compare a company's performance to that of its industry peers. A high stock turnover rate indicates that a company is selling its inventory quickly and efficiently. This could suggest that the company has a good demand for its products, effective inventory management practices, and potentially higher profit margins. A low stock turnover rate, on the other hand, may indicate a slow sales, too much inventory or too many stockouts, which could lead to lower profit margins or even financial losses. This metric is also used to understand how often a company is replenishing its inventory and if the inventory levels are enough to meet the demand. It can also be used to identify trends and make informed decisions on inventory management and purchasing. |
How to Calculate: |
The stock turnover rate is calculated by dividing the Cost of Goods Sold (COGS) by the Average Inventory (AvgI) for a specific period. |
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| For example, let's say a company has a cost of goods sold (COGS) of $1,000,000 and an average inventory of $500,000 for a specific period. In this case, the company's inventory turnover ratio is 2, which means that it is selling its inventory twice in a specific period. This indicates that the company is selling its inventory quickly, which can be a sign of strong demand for its products and efficient inventory management. |