Which of the following formulae is used to calculate stock turnover rate?
Answer Details
The formula used to calculate stock turnover rate is \(\frac{\text{cost of sales}}{\text{average stock}}\). This formula is used to determine how many times a company has sold and replaced its stock over a given period of time, usually a year. The cost of sales represents the total cost of goods sold during the period, while the average stock is calculated by adding the opening and closing stock and dividing by two. The stock turnover rate indicates how effectively a company is managing its inventory and turning it into sales, and it can be used to identify areas for improvement in the inventory management process.