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Stockturn
A financial ratio which shows how fast a company sells its goods, calculated as: sales divided by year-end stocks. If, for example, a company has sales of £60m and a year-end stock figure of £3.2m its stockturn multiple is 18.85.Stockturn is particularly relevant for manufacturing or retailing businesses. The higher the figure, the more efficient the company is in processing stock. The typical multiple for a manufacturer is 5 to 6. Retailers that are doing well and run efficiently will have a much higher multiple because they should be able to put the burden of carrying stock on their suppliers.Another way of looking at stock is to calculate the number of days on average that a company keeps its stock. This is expressed as the year-end stock figure divided by the sales, and multiplied by 365. Using the figures above, £3.2m divided by £60m, then multiplied by 365 = 19.46 days.
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