Inventory turnover rate is the ratio of operating income and inventory, inventory turnover days is one of the calculation methods of inventory turnover rate, inventory turnover rate is an indicator that reflects the operational capacity of the enterprise, is used to reflect the efficiency and effect of the use of inventory funds of the enterprise, and then open to judge the operation and management ability of the enterprise inventory.
First, the calculation of inventory turnover. Inventory turnover rate is the ratio of operating income to inventory, inventory turnover rate has three calculation methods, the calculation formula is:
1. Inventory turnover = operating income / inventory. The number of inventory turnovers indicates the number of inventory turnovers in a year, that is, the impact of each dollar of inventory investment on operating income.
2. Inventory turnover days = 365 days / (operating income / inventory). Inventory turnover days indicate the time it takes for inventory to turn around once, that is, what is the average time it takes for inventory to be converted into cash.
3. Inventory to operating income ratio = inventory / operating income. The inventory-to-operating income ratio indicates how much inventory investment is required for each yuan of operating income of the enterprise.
For example, an enterprise achieves an annual operating income of 30 million yuan, and the average balance of funds occupied by inventory is 1.19 million yuan. The result is as follows:
Inventory turnover = 30 million yuan / 1.19 million yuan = 25.2 (times / year)
Inventory turnover days = 365 days / (30 million yuan / 1.19 million yuan) = 14.5 (days / times)
The ratio of inventory to operating income = 1.19 million yuan / 30 million yuan = 4%.
Second, the calculation and analysis of inventory turnover rates need to pay attention to the problem.
1. The rationality of inventory turnover index. We know that the inventory is composed of raw and auxiliary materials, products and finished products, etc., when analyzing the inventory turnover index, according to the actual situation of enterprise production and operation, if the enterprise is in the peak season of production and operation, then the enterprise must prepare sufficient materials, but also according to the order to do a good job of finished product reserves, in this situation, the number of inventory turnover days of the enterprise will increase, and this increase will affect the increase in the operating income of the enterprise after the period. Therefore, when analyzing inventory turnover indicators, enterprises should not simply look at the changes in the indicators and easily draw conclusions.
In addition, the inventory turnover index is not the lower the better, too low can not guarantee the materials required for production and operation, too high will also lead to the waste of inventory and other working capital, reasonable is the most important.
2. Changes between inventory and accounts receivable, operating income and accounts payable, and changes in the internal structure of inventory. To some extent, the level of inventory turnover index can be seen as the status of production and operation of enterprises, but further analysis is needed and the actual situation of production and operation activities of enterprises needs to be combined.
When we analyze the inventory turnover rate of the enterprise, we should combine the accounts receivable, operating income and accounts payable, such as the poor operating condition of the enterprise, relying on the sale of physical assets such as inventory to maintain the production and operation activities of the enterprise, then the inventory balance of the enterprise will decline at this time, which will lead to a decrease in the number of inventory turnover days. The reduction of inventory turnover days in this state is not necessarily a good phenomenon.
In addition, we should also pay attention to the changes in the internal structure of inventory, normal operating enterprises, there is a certain proportion between the internal structure of their inventory, but if there is an increase in finished products, and other items such as raw and auxiliary materials are significantly reduced, under normal circumstances, it is the backlog of finished products formed by the enterprise, the market environment of the product has changed, or there is a problem with the quality of the product, resulting in the occurrence of returns, etc., which in turn leads to changes in the inventory turnover rate.
3. When calculating indicators, the selection of operating income and operating costs. We know that some enterprises do not use operating income indicators when calculating inventory turnover, but use operating cost indicators, it should be said that the selection of different indicators has different calculation results, and the content of reflection and analysis is also different. Generally speaking, when evaluating the inventory management status of enterprises, the operating cost is mostly used to calculate the inventory turnover rate of enterprises.
The difference between inventory turnover, calculated using operating income and operating costs, is the difference between gross profits.
In short, the inventory turnover rate is the ratio of operating income to inventory, and the number of inventory turnover days is one of the calculation methods of inventory turnover rate, that is, the inventory turnover rate is differently expressed, which is an indicator that reflects the operational capacity of the enterprise. Of course, when analyzing the inventory turnover index, enterprises cannot simply look at the level of the indicators, but should conduct effective analysis and judgment according to the actual situation of the production and operation activities of the enterprise.
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October 29, 2021