Definition: Sales (or turnover) divided by year-end stocks
Significance:Stockturn shows how fast a company sells its goods. The higher the figure, the leaner the company.
Example
M&S had sales of £6,806m and its year-end stock figure was £377m. Its stockturn multiple was therefore just over 18.05
Yardstick:
The appropriate figure depends on the type of business, but stockturn is particularly relevant for manufacturing or retailing businesses. Retailers that are doing well and run efficiently will have a much higher multiple because they should be able to put the burden of carrying stock on their suppliers.
Another way of looking at stock is to calculate the number of days on average that a company keeps its stock. This is expressed as the year-end stock figure divided by the sales, and multiplied by 365.
Example
In M&S's case, (377 / 6806) x 365 = 20 days.
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