This metric gives you insights into how quickly your inventory sells. It’s a fine line to walk, balancing between having enough stock to meet customer demand and not having excess that ties up your capital.
How to Measure the Stock Turn Rate
To measure the stock turn rate, you’ll need to take a deep dive into your inventory data. It’s calculated by dividing the cost of goods sold (COGS) by the average inventory. This sounds complex, but let’s break it down into simple steps.
- Step 1: Calculate your cost of goods sold (COGS). This includes the price you paid for the products sold during a specific period.
- Step 2: Find out your average inventory. To do this, add your inventory at the beginning and end of the period. Then divide by two.
- Step 3: Divide the COGS by the average inventory. The result is your stock turn rate – it’s the number of times your stock sells out in the given period.
A high stock turn rate means you’re selling your products quickly, which is great for cash flow. On the other hand, a low rate suggests that your products are sitting on the shelves too long, which could lead to wasted resources or obsolete stock.
A good stock turn rate is indicative of efficient inventory management and can be a key performance indicator for your overall business health.
Stock Turn Rate Calculator
The values you enter into this calculator are not saved or stored in any way.