Stock Turnover Period Formula

Stock Turnover Period Formula

Stock turnover period shows how long it will take stock period to be sold. Stock Turnover may be calculated by the following Formula

Stock Turnover Period =     Average Inventory     x 365

                                             Cost of Sales

Example

Stock= 5,000

Cost of Sales = 40,000

Calculate Stock Turnover period?

Solution

Stock Turnover Period =     Inventory or Average Inventory     x 365

                                                   Cost of Sales

= (5,000/40,000) x 365

= 45.6 days or 46 days

Short turnover period is preferred by the companies, because companies are interested to make more sales, and low stock period shows high selling of stock. in other word a long stock turnover period shows poor performance of sales department.