How to calculate your Inventory Turnover Ratio [infographic]

Posted by James Price | JPAbusiness on 29-Aug-2018 02:00:00

The first step in determining the correct stock holding for your business is to understand your current Inventory Turnover Ratio (ITR) i.e. your stock turn.

As a rule of thumb, a stock holding that represents 12 months worth of sales is the maximum needed. However, it’s very hard to generalise.

Some businesses are import oriented so need to commit to a certain level of stock to ensure their freight rate is not exorbitant and/or they have sufficient stock ordered from a single season pre-order. This may cause lumps in their stock holdings.

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Topics: Cash flow, Working capital, Inventory, infographic, business advice, inventory turnover ratio, stock, stock control

The price of poor inventory management [case study]

Posted by James Price | JPAbusiness on 12-Oct-2016 03:20:00

A couple of years ago the JPAbusiness team facilitated the sale of a strong, independent business involved in import and distribution.

It was a well-known, independent brand that had been established for well over 50 years and had solid bottom-line performance.

Unfortunately, when it came time to exit the business it soon became apparent there was too much inventory (stock on hand).

We negotiated a price for the goodwill, plant and equipment etc, based on a multiple of Business Maintainable Earnings (BME), which is essentially the cash flow of the business. Then it was time to address the stock value.

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Topics: Selling your business, Advice, Cash flow, Case study, Inventory, business advice, selling a business, inventory turnover ratio, cash flow management, business sale

 
Disclaimer: The information contained in this blog is general in nature and should not be taken as personal, professional advice. Readers should make their own inquiries and obtain independent, professional advice before making any decisions, taking any action or relying on any information in this blog. 
 
 

 

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