Monday, 16 September 2013

Tips : How to calculate inventory turnover ratio analysis

satriaonblogger - How to calculate inventory turnover ratio anlysis . Inventory turnover indicates the ability of the funds that are embedded in a rotating inventory in a given period, or the liquidity of the inventory and a tendency to overstock (Riyanto, 2008:334).

Inventory turnover ratio measures the efficiency of the management of merchandise inventory. This ratio is an indication that is quite popular to assess operational efficiency, which shows how well the management of existing capital controls on inventory.

There are two problems that arise in the calculation and analysis of the inventory turnover ratio. First, sales of assessed according to the market price (market price), inventories are valued according to the cost of goods sold (at Cost), then the actual inventory turnover ratio (at cost) is used to measure the physical inventory turnover. The ratio is calculated by dividing sales by inventory measuring inventory turnover in cash (Sawir, 2003:15).

However, many research institutions financial ratios using the inventory turnover ratio (at mark et) so if you want to compare the inventory turnover ratio is the ratio of industry (at market) should be used. Second, the sales occur throughout the year while the inventory numbers are instantaneous picture of the state. Therefore, it is better to use the average inventory of the beginning inventory plus ending inventory divided by two.

Inventory turnover ratio is calculated by the formula:

Turnover of inventory (at cost) = cost of goods sold / average inventory

Inventory turnover (at market) = sales / inventory

That's all about how to calculate inventory turnover (inventory turnover). May be useful :)


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