![]() ![]() ![]() Please refer to our Customer Relationship Statement and Form ADV Wrap program disclosure available at the SEC's investment adviser public information website: CARBON COLLECTIVE INVESTING, LCC - Investment Adviser Firm (sec.gov). Registration with the SEC does not imply a certain level of skill or training. The longer an item is held, the higher its holding cost will be, and so companies that move inventory relatively quickly tend to be the best performers in an industry.Ĭontent sponsored by Carbon Collective Investing, LCC, a registered investment adviser. The speed at which a company is able to sell its inventory is a crucial measurement of business performance. Define Inventory Turnover Rate in Simple Terms Investors may also like to know the inventory turnover rate to determine how efficiently one company is performing against the industry average. While strong sales are good for business, insufficient inventory is not. A high ratio can imply strong sales, but also insufficient inventory. This could be due to a problem with the goods being sold, insufficient marketing, or overproduction. The purpose of calculating the inventory turnover rate is to help companies make informed decisions about pricing, manufacturing, marketing, and purchasing new inventory.Ī low ratio can imply weak sales and/or possible excess inventory, also called overstocking. The formula for calculating the inventory turnover rate is as follows:įor example, a company with $20,000 in average inventory with a COGS of $200,000 will have an ITR of 10. Inventory turnover rate (ITR) is a ratio measuring how quickly a company sells and replaces inventory during a given period. ![]()
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