![]() You can calculate your DSI by multiplying your stock turns ratio by 365. A lower DSI is usually preferable because it means a company can turn its inventory on hand into profits faster. This metric measures the average time in days it takes a company to turn its stock into sales. You might also hear the term “inventory turns.” This means essentially the same thing - the number represents how many inventory turns occurred within the period.Īnother figure that’s similar to inventory turnover is days sales of inventory (DSI). If you’re using annual inventory turnover, a rate of 4 means the company turned over its stock four times that year. Tracking quarterly and even monthly stock turns can also be helpful. ![]() Typically, companies calculate their inventory turnover for the fiscal year. A faster ratio may mean the company doesn’t have enough supply on hand or that sales are particularly strong. Low inventory turnover may also mean that products have time to expire, deteriorate or go out of season before they sell. A slow turnover rate may indicate that a company has too much stock or weak sales numbers. This ratio measures efficiency for how the company purchases and sells goods. Inventory turnover is a metric representing how many times a company sells and replaces its stock entirely within a given period. Let’s talk more about this critical metric and how to calculate inventory turnover for your own business. This makes inventory turnover one of your most important performance indicators, both for your stock management team and for your company as a whole. When inventory is sold faster, companies have better cash flow and face fewer risks associated with unsold stock. It’s also one of your riskiest investments since your profitability depends on selling off your inventory and turning it into cash - also known as turning it over. As an e-commerce business, your merchandise is your most valuable asset.
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