A business firm is eager to have its inventory move
quickly, or “turn over.” Stockturn rate, or simply stockturns, measures this
inventory movement. For a retailer, a slow stockturn rate may show it is buying
merchandise customers don’t want, so this is a critical measure of performance.
When a firm sells only a single product, one convenient way to measure stockturn
rate is simply to divide its cost of goods sold by average inventory at cost. The
sixth item in Figure B–2 shows how to calculate stockturn rate using information
in the operating statement: