Inventory turnover

• What type of ratio is inventory turnover?

  Efficiency ratio
• What does inventory turnover measure?

  How quickly inventory is converted into sales
• What is the formula for inventory turnover?

  Cost of sales divided by average inventories
• What does a higher inventory turnover indicate?

  Better efficiency in converting stock to sales
• Where can you find cost of sales in financial statements?

  Near the top of the income statement
• What does average inventory represent?

  The average amount of stock held over time
• How does just-in-time inventory affect turnover?

  It generally increases inventory turnover ratio
• What could a decreasing inventory turnover indicate?

  Stock is not selling as expected
• What might cause low inventory turnover?

  Outdated or obsolete stock
• What is the impact of moving from just-in-time to just-in-case?

  It may lower inventory turnover ratio
• How do different industries affect inventory turnover targets?

  Different industries have varying turnover targets
• Why do restaurants have high inventory turnover?

  They often sell perishable products quickly
• How does product range affect inventory turnover?

  Narrow range suggests higher turnover, wider lower
• What could a high inventory turnover indicate negatively?

  Reduced prices leading to lower profit margins
• What is a potential downside of high inventory turnover?

  Lower gross profit margin
• What external factors might influence inventory management decisions?

  Brexit, coronavirus, and supply chain concerns
• How does holding more average inventories affect turnover?

  It makes the inventory turnover ratio smaller