By Dr. John T. Drea, Western Illinois University
Stockturn Rate (answer)
=                      $2,500,000                          
(140,000 + 150,000 + 110,000 + 100,000)/4
= $2,500,000/125,000 = 20
Interpreting a stockturn rate - be sure to consider
your industry.  Which industries are likely to have
lower stockturn rates?
1. A low rate increases inventory carrying costs
and ties up working capital.
2. A drop may mean that the product assortment
isn’t as attractive as it once was.
3. A drop may also mean a business will need
more working capital for a similar amount of sales.