Explanation of Inventory Turnover

There is an explanation of inventory turnover; it refers to a relationship that exists between inventory and sales.  It is simply the number of days it takes to turn over the dollar value of the inventory. This relationship is important because as a retailer, you would want this frequency as 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.

Flipping Houses – Proper Inventory Turnover Rate

Turnover Rate with Flipping Houses

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 has a greater return on equity. OK, this seems all well and good, but does turning the inventory over in the house flipping business as fast as possible generate the same benefits? 

Inventory – How to Finance

Inventory Financing

In financing a small business, there are a multitude of tools available. One way to finance inventory is by using the 30 day pay program with your vendors. Another tool is seasonal payment program and a third tool is exercising a line of credit tied to receivables or sales history.  

An Explanation of Inventory Turnover

Inventory Turnover

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. 

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