INVENTORY TURNOVER RATIO
CONDITION
| Year : | 2006 |
| Your ratio : | 16.11 |
| Industry Avg : | 40.45 |
| Cost of Goods Sold : | $424,970 |
| Average Value Of Inventory : | $26,380 |
GRAPH
INVENTORY TURNOVER RATIO
The ratio should be compared against industry averages. A lower turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying. High inventory levels are unhealthy because they represent an investment with a rate of return of zero. It also opens the company up to trouble in the case of failing prices.
Inventory Turnover tells how often a business' inventory turns over during the course of the year. Because inventories are the least liquid form of current asset, a high inventory turnover ratio is generally positive. On the other hand, an unusually high ratio compared to the average for your industry could mean a business is losing sales because of inadequate stock on hand.
The perfomance of this ratio versus your peers indicates taat you need to substantially increase your sales efforts. Some inventory may be aged and should be discounted to make for more popular items.