Inventory turnover

The concept of turnover in the economy is often found. One of the most frequently analyzed economic indicators is stock turnover.

Commodity stocks are the least liquid short-term assets, so they are exposed to risks that other current assets are not exposed to . Stocks are frozen means, because they represent money that the enterprise does not use. The vast majority of organizations are trying to avoid large inventories with reduced turnover. The best way is to have enough free funds obtained by speeding up turnover.

Excessive inventory often leads to unnecessary costs and a decrease in the level of profit. All stocks are constantly changing value, so for their characteristics, the average stock of goods is calculated. It is determined in terms of value and in kind; In general and for different groups of goods.

The inventory turnover is of several types:

- each individual item in physical terms (by volume, pieces, mass);

- each individual name by cost;

- a collection of names or a general stock in kind;

- the totality of commodity items or the total stock at cost.

The turnover of stocks is characterized by the turnover ratio. This indicator shows the number of revolutions of the average balance of goods for a certain (reporting) period. This coefficient can be calculated by various parameters and for different time periods, for a set of titles or one item of goods. Often, the turnover ratio is simply called "stock turnover." The most popular formulas for calculating the turnover ratio are:

- Inventory value factor by cost = value of goods sold for a certain period / average investment in commodity stocks.

- Factor of commodity stocks in physical terms = quantity of goods sold for a certain period of time / average for this period quantity of stock.

- The stock position factor by cost = the ratio of the total value of all units sold for a given period of a given position / the average investment in this position over that period.

To calculate this indicator it is necessary to determine: the average stock of goods and turnover for a certain period, the settlement period (week, quarter, month, year).

The turnover of reserves by one position in terms of value and quantity gives the same result, and the aggregate of positions by quantity differs from this indicator in value. The inverse of the turnover ratio is used to characterize the average balances of circulating assets per unit of sales of goods in quantitative and value terms. As a rule, the average duration of turnover of these funds in days equals the ratio of a certain period to the turnover ratio (the number of turns). The average duration of such a turnover is called the "average stock in days".

The period of inventory turnover in days is characterized by the speed of commodity circulation and the time of one turnover:

Inventory turnover in days = average reserves / cost of goods sold.

In working with indicators, the following important points should be considered:

- turnover is calculated only where there are written-down goods in warehouses;

- those that have not been capitalized and are written-off from the warehouse in the calculations are not taken into account;

- do not take into account the goods sold, which are in the warehouse, and are not shipped to the buyer;

- reserves and turnover should be calculated in some quantities;

- analysis of inventory turnover should be carried out in dynamics;

- in each branch of the economy, the region, each type of goods has its own turnover rates.

There is one regularity: the higher the turnover of commodity stocks, the less time they are in warehouses and quickly turn into money again.