Glossarytaught in M2.02
Inventory turnover
Also called stock turn, inventory turns.
Cost of goods sold divided by average inventory. How many times a year the stock is sold and replaced.
A distributor turning ₹3,900 crore of cost against ₹780 crore of stock achieves five turns, which is the same statement as 73 inventory days in a different unit.
Turns are the working language of retail and distribution, because the arithmetic of the business runs on them: gross margin percentage multiplied by sales divided by average inventory at cost gives gross margin return on inventory, which is what a category manager actually optimises. With turns measured on cost of goods sold, as here, the same figure is the markup on cost multiplied by turns.
Slowing turns is the first number to move when demand softens.
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