Stock Turnover

A-Vic

Sorry probs been asked a million times but still stuck on how to calculate the above is there a fools way of calculating it please?

Thanks

Vic

swampy1901

Average Stock / Cost of Sales x 365


Swampy

A-Vic

Thanks swampy - how do you work out average stock tho? more so if you only have cost of sales

Woooof

A-Vic wrote: »

Thanks swampy - how do you work out average stock tho? more so if you only have cost of sales

Use your closing stock figure

A-Vic

Woooof wrote: »

Use your closing stock figure

Great cheers wooof

Rinske

A-Vic wrote: »

Thanks swampy - how do you work out average stock tho? more so if you only have cost of sales

Just to add:

Average stock is opening stock plus closing stock divided by 2 if you have those figures.

jewels.p

In my book it learns it states it as:

Stock/COS x 365 Days

A-Vic

now you get why am confused

jewels.p

I am gonna stick with my book. You are right though with MAC there are so many different ways to do stuff no wonder everybody hates it.

OK now someone will come on and say they love MAC!

Marga

jewels.p wrote: »

I am gonna stick with my book. You are right though with MAC there are so many different ways to do stuff no wonder everybody hates it.

OK now someone will come on and say they love MAC!

i love MAC


*runs*

Rinske

Stick to the book! It's easier then remembering all the different options. I just thought I explain what they meant with average stock, as A-Vic asked what it was.

Both ways are correct as far as I know and for the exam, it depends on the question, but as long as you remember the formula and how to use it (and what it represents) you should be ok.

Marga

Stock Turnover Ratio

To analyse stocks a little further it is possible to use ratio analysis. The STOCK TURNOVER RATIO shows how many times over the business has sold the value of its stocks during the year. It is calculated by:-

STOCK TURNOVER RATIO = Cost of goods sold / Stocks

The higher the stock turnover the better, because money is then tied up for less time in stocks. A quicker stock turnover also means that the firm gets to make its profit on the stock quicker, and so the firm should be more competitive. However, it will vary between industries and so it is important to compare within an industry.

It is also possible to express the ratio as a number of days, which is sometimes an easier way to understand it. To do this use the following formula:-

STOCK TURNOVER RATIO (in days) = Average Stocks / (Cost of goods sold/365)

The result of this ratio gives the "number of days that on average money is tied up in stocks". The longer this is, obviously the worse this is for the business as the money is not available to be used elsewhere. Since the stock is part of the working capital it is important that it is available for use promptly.

jewels.p

Hey Marga stick with the simple answers please!

A-Vic

Marga wrote: »

Stock Turnover Ratio

To analyse stocks a little further it is possible to use ratio analysis. The STOCK TURNOVER RATIO shows how many times over the business has sold the value of its stocks during the year. It is calculated by:-

STOCK TURNOVER RATIO = Cost of goods sold / Stocks

The higher the stock turnover the better, because money is then tied up for less time in stocks. A quicker stock turnover also means that the firm gets to make its profit on the stock quicker, and so the firm should be more competitive. However, it will vary between industries and so it is important to compare within an industry.

It is also possible to express the ratio as a number of days, which is sometimes an easier way to understand it. To do this use the following formula:-

STOCK TURNOVER RATIO (in days) = Average Stocks / (Cost of goods sold/365)

The result of this ratio gives the "number of days that on average money is tied up in stocks". The longer this is, obviously the worse this is for the business as the money is not available to be used elsewhere. Since the stock is part of the working capital it is important that it is available for use promptly.

Fantastic thanks just what i was after

SandyHood

finished goods have incurred the cost of sales being produced

So Finished goods Stock trurnover period is

Closing stock value x 365
Cost of sales value

SandyHood

Raw materials have only cost the purchase cost of raw materials

So Raw Material stock turnover period

Value of raw materials in closing stock x 365
The value of materials purchased

A-Vic

Great thanks sandy