Ratios: Inventory Turnover definitions Flashcards
Ratios: Inventory Turnover definitions
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Inventory Turnover Ratio Efficiency metric showing how many times average inventory is converted into cost of goods sold during a period. Cost of Goods Sold Total expense incurred to produce or purchase goods that were sold during a specific period. Average Inventory Mean value of inventory held, calculated by adding beginning and ending balances and dividing by two. Efficiency Ratio Financial measure used to assess how effectively resources, such as inventory, are managed. Benchmarking Process of comparing a company's performance metrics, like inventory turnover, to industry competitors. Warehouse Cost Expenses associated with storing inventory, including rent, utilities, and maintenance. Beginning Inventory Inventory balance present at the start of an accounting period, used in average inventory calculations. Ending Inventory Inventory balance remaining at the close of an accounting period, used in average inventory calculations. Net Sales Total revenue from sales after deducting returns, allowances, and discounts. Sales Revenue Income generated from selling goods or services, reflecting the selling price received from customers. Inventory Management Strategic control of inventory levels to balance sales fulfillment and minimize holding costs. Industry Comparison Evaluation of a company's metrics, such as inventory turnover, relative to similar businesses. Resource Allocation Distribution of assets, like inventory, to maximize operational efficiency and minimize excess. Inventory Cycle Ongoing process of purchasing, storing, and selling inventory within a business. Inventory Balance Monetary value of goods held in stock at a specific point in time.
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