Building on our earlier article on inventory management, we now consider a quantitative approach: ratios. Inventory ratios help precisely measure and manage your stock levels and improve performance, cash flow, and profitability. Here we explain the 4 inventory ratios that every inventory-carrying company should keep in mind.
It’s a business owner’s worst nightmare: too much inventory sitting in a warehouse, collecting dust, eroding capital, and counting down its days until obsolescence. Then there’s the opposite problem: a sudden spike in demand that your inventory is too meager to meet. How do you regulate your inventory to hit the sweet spot?