inventory turnover

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A ratio that measures the number of times items of stock are used annually. To obtain an accurate measure of stock turnover the following formula is used for each commodity:number of units used per annum/number of units in stock.

number of units used per annum/number of units in stock.

The number of units in stock may be taken at the start or the end of the year or may be the average of both. Because the information required for this ratio is only likely to be available from the internal management accounts, a different formula using final accounts figures is often used as an overall measure of inventory turnover (see rate of turnover).

Subjects: Accounting.

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