Stock Turnover Formula

Stock Turnover Formula

Stock Turnover is calculated to show how many times inventory sold during the year

Stock Turnover =     Cost of Sales    

                                Inventory

Example

Cost of Sales = 50,000

Inventory = 10,000

Calculate Stock Turnover

Solution

Stock Turnover =     Cost of Sales    

                                Inventory

= 50,000/10,000

= 5 (times sold)

High stock turnover is preferred by the company, because it shows sales department doing hard work and all stock is being sold. Furthermore, high turnover reduces the inventory obsoleteness risk.