This is a very easy ratio simply divide the total cost of the goods you have sold for the year (or period) by
your closing stock or average stock on hand, at cost. This will give you the amount of times your stock turns
over during the year or period. If you divide 365 by the amount of times your stock turns over per year it will
tell you how many days it takes for your stock to turn over. For those businesses with a large amount of
capital tied up in stock this is a crucial indicator.

Many small business operators would already have a good idea of these figures but how does your
business compare with your industry averages?
Industry Examples:
Corner Stores - High income stores turnover their stock 35 times a year. Whereas low income stores only
turnover their stock 10 times a year. The average is 21 times a year.
Shoe Shops - High income stores turnover their stock 2.48 times a year. Whereas low income stores only
turnover their stock just under once a year. The average is 1.77 times a year.
Giftware – High income stores turnover their stock 4.75 times a year. Whereas low income stores only
turnover their stock 1.86 times a year. The average is 3.22.
Hardware – High income stores turnover their stock 6.79 times a year. Whereas low income stores only
turnover their stock 2.58 times a year. The average is 4.27.
Jewellery – High income stores turnover their stock 4.50 times a year. Whereas low income stores only
turnover their stock 0.74 times a year. The average is 2.03.
Menswear – High income stores turnover their stock 3.54 times a year. Whereas low income stores only
turnover their stock 1.45 times a year. The average is 2.52.
Newsagencies – High income stores turnover their stock 12.55 times a year. Whereas low income stores
only turnover their stock 4.34 times a year. The average is 8.01.
Hints to Improve Stock Turnover:
1) Do the above calculation on an individual basis for each stock line to identify slow moving lines and
consider their relevance to your business.
2) Introduce a computer controlled stock system to track this information more readily and allow you to
be able to re-order stock at the last minute because you know exactly how much you have and what
your average daily needs for that item are.
3) Sell slow moving stock on consignment only so that it is not tying up capital.
4) Have a sale to clear obsolete stock, or give obsolete stock away as a promotion to buy other items.
5) If you must hold slow moving items make sure your margin on those items is higher than other stock
items as slow moving items take up a larger share of overhead, both in space and cashflow.