Case summary:
It is necessary for the retailers to hold goods to make sales. In fact, the biggest asset of retailers is stock. Not holding enough inventory would result in loss of sales; at the same time, holding too much of inventory would result in increase in cost and lower margins. Both these circumstances will lead to reduction in profits.
The retailer can run a stable business by holding enough stock and meeting customers’ needs and demands.
To determine: The calculated stock turnover rate is better or worse for the company.
Stock turnover rate:
It is also known as inventory turnover ratio, which tells the number of times a company has replaced and sold stocks during a particular period.
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