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the Inventory turnover is a measure of the number of times inventory is sold or used in a time period such as a year.
Reducing holding cost increases net income and profitability as long as the revenue from selling the item remains constant.
The formula for inventory turnover:
The most basic formula for average inventory:
The average days to sell the inventory is calculated as follows:[1]
Here are some measures:~ Increase the number of days on accounts payable and decrease the number of days on your account receivable
~ Decrease the cost of good sold
~ Maintain just in time management for all purchase orders
~ Maintain a balanced inventory based on quarterly results such as beginning Inventory-Ending Inventory/2
~ Increase sales volume per specified quarter or period
~ Manage inventory shrinkage, obsolete, damages, or reverse logistics
~Maintain general selling and administration accounts and fluctuations such as increased inflation
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