A relationship exists between inventory and sales. This is referred to as ‘Inventory Turnover’ or ‘Turnover Ratio’. It is simply the number of days it takes to turn over the dollar value of the inventory. This relationship is important because as the retailer, you would want this number has high as possible. You should not use this ratio to compare yourself to another similar store for various reasons, use it to compare yourself to the industry as a whole or to compare to past performances from the same store. It is a mere standard for internal comparison only; it is not a gauge of value. But if properly implemented and utilized, the retail store owner can maximize profits.
In your typical business operation, turning the inventory over as often as possible has several benefits. First, it generally reduces overall costs, secondly, it generates greater profits and third, by increasing the profitability, the company […]