The number of times inventory is sold over a period of time. This ratio shows, when compared to industry averages, whether a firm holds excessive stocks of inventory. Inventory represents a rather illiquid asset (difficult to convert quickly to cash) to a company.
Inventory turnover = Cost of Goods Sold/Inventory
OR:
Inventory turnover = Beginning Inventory Plus Ending Inventory/2
The time between making a sale and receiving payment
Days sales outstanding = Accounts Receivable/(Total Sales/360)
Copyright © Marilyn Shaw and Merri Incitti
This page last updated November 1995
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