Definition: A measure of how often inventory is sold or replaced during a period. A common accounting formula is cost of goods sold divided by average inventory; some analyses use sales-based measures.
Example
Under a cost-based formula, $240,000 cost of goods sold divided by $60,000 average inventory gives four turns.
Keep the distinction clear
Use the numerator and inventory basis specified in the question or report. Sales-based and cost-based ratios are not interchangeable.
Related terms
Income Statement · Balance Sheet · Business Opportunity
Keep studying
References: FREC Course II syllabus, Session 9
Comments
0 comments
Article is closed for comments.