Inventory Turnover Rate Archives | Value Investing - Business and Economic Principles

Activity Ratios

Business Ratios / By David J Hoare MSA / 03/18/2019 03/03/2022

The majority of activity ratios measure the ability of the company to turn assets into earnings. All businesses utilize a simple principle, buy an asset at a low price and sell it at a higher price. Even service based businesses do this. Labor is purchased for a certain value and then sold for a much higher price. Retail businesses purchase inventory and then turn around, mark it up and then sell it to make a profit. There isn’t any business out there that doesn’t exercise this basic business principle.

Flipping Houses – Proper Inventory Turnover Rate

Construction Industry Standards / By David J Hoare MSA / 02/27/2015 02/27/2022

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

Finance / By David J Hoare MSA / 04/16/2013 02/24/2022

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.

Liquidity – What Does This Mean?

Accounting Concepts and Principles / By David J Hoare MSA / 01/12/2013 02/25/2022

In business, liquidity is defined as the period of time it takes to turn assets into cash. It takes 20 minutes to turn the balance in the checking account into cash. You head on down to the bank and present a check. You get cash. But most businesses run on just more than the cash in the bank account.

An Explanation of Inventory Turnover

Retail / By David J Hoare MSA / 01/03/2013 02/27/2022

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.