Stock Turnover Example

Stock Turnover Example

Stock Turnover is calculated to determine that how frequently stock is being sold i.e. how many times stock shall be sold during the period. This concept can be explained with following example

Stock Turnover =     Cost of Sales    

                                Inventory

Example

ABC Company Cost of Sales during the Year = 80,000

Closing Inventory Level = 20,000

Calculate Stock Turnover

Solution

Stock Turnover =     Cost of Sales    

                                Inventory

= 50,000/10,000

= 4 (times sold)

Above example shows that company has sold its inventory 4 times during the year. The performance of the company can be judged by comparing inventory turnover of the company with other comparable company.