Stock market turnover definition

In accountingthe Inventory turnover is a measure of the number of times inventory is sold or used in a time period such as a year. The equation for inventory turnover equals the cost of goods sold or net sales divided by the average inventory. Inventory turnover is also known as inventory turnsmerchandise turnoverstockturnstock turnsturnsand stock turnover. Multiple data points, for example the average of the monthly averages, will provide a much more representative turn figure.

The average days to sell the inventory is calculated as follows: A low turnover rate may point to overstocking, [2] obsolescence, or deficiencies in the product line or marketing effort. However, in some instances a low rate may be appropriate, such as where higher inventory levels occur in anticipation of rapidly rising prices or expected market shortages.

Conversely a high turnover rate may indicate inadequate inventory levels, which may lead to a loss in business as the inventory is too low.

What is Share Turnover? definition and meaning

This often can result in stock shortages. Some compilers of industry data e. Cost of sales yields a more realistic turnover ratio, but it is often necessary to use sales for purposes of comparative analysis. Cost of sales is considered to be more realistic because of the difference in which sales and the cost of sales are recorded. Sales are generally recorded at market value, i.

In the event that the firm had an exceptional year and the market paid a premium for the firm's goods and services then the numerator may be an inaccurate measure. However, cost of sales is recorded by the firm at what the firm actually paid for the materials available for sale. Additionally, firms may reduce prices to generate sales in an effort to cycle inventory. In this article, the terms "cost of sales" and "cost of goods sold" are synonymous.

An item whose inventory is sold turns over once a year has higher holding cost than one that turns over twice, or three times, or more in that time. Stock turnover also indicates the briskness of the business. The purpose of increasing inventory turns is to reduce inventory for three reasons. From Wikipedia, the free encyclopedia.

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Share Turnover financial definition of Share Turnover

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