INVENTORY TURNOVER RATIO
How many times do you sell out your entire inventory?
“Inventory turnover” represents the number of times you sell out your entire inventory in one year. This can be worked out very easily by dividing sales with closing stock or average inventory.
In case of jewelry business, the ratio should be calculated based on weight instead of amount. If sale of 22KT is say 30kgs in the entire year and average stock during the year of such chains is say 10kgs, the inventory turnover ratio will be 30/10 = 3. This means you have turned your inventory of 22KT jewellery 3 times in a year.
You can apply same formula on different categories too such as 18KT, 23KT etc jewellery or itemised jewellery such as sets, tops, chains, rings etc. and now the performance of each in comparison to previous years.