STOCK TURNOVER RATIO - Accounts and Finance for Managers

The ratio expresses the speed of converting the stock into sales. In other words, how fast the stock is being converted into sales in a year? The greater the ratio of conversion leads to lesser the number of days /weeks /months required to convert the stock into sales.

Stock turnover ratio= (Cost of Goods Sold/ Average stock)

Standard norm of the ratio:

Higher the ratio is better the firm in converting the stock into sales and vice versa

The next step is to find out the number of days or weeks or months taken or consumed by the firm to convert the stock into sales volume.

Stock velocity= 365 days/52 weeks/12 months Creditors Turnover Ratio

Standard norm of the ratio
Lower the duration is better the position of the firm in converting the stock into sales and vice versa.


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