![]() That said, low turnover ratios suggest lackluster demand from customers and the build-up of excess inventory.įor example, retailers are typically known for exhibiting high turnover ratios – in particular, “fast-fashion” retailers like Zara are highly regarded for their ability to research trends and clear out their inventory quickly. How to Interpret Inventory Turnover Period?Ĭomparing a company’s ratio to its industry peer group can provide insights into how effective management is at inventory management.įor companies with low turnover ratios, the duration between when the inventory is purchased, produced/manufactured into a finished good, and then sold is more prolonged (i.e. The company’s inventory, if left unsold, might eventually need to be written down to reflect the true (lower) value on the balance sheet.
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