Stock turns 4.1 times a year. Half the cash sits in lines that turn once.

Blended inventory turnover is an average of a very uneven distribution, and the average is precisely what keeps the trapped cash invisible.

By Steve 5 min read
Abstract bridge artwork for Stock turns 4.1 times a year. Half the cash sits in lines that turn once.

A business with a healthy blended stock turn can still be starved of cash. The two facts are not in tension, because turnover calculated across the whole balance sheet line is an average of a distribution that is almost never symmetrical. A handful of lines move constantly and consume very little working capital relative to the revenue they produce. A long tail moves once or twice a year, or not at all, and quietly holds a disproportionate share of the cash. The blended figure sits somewhere in the middle and…

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Important: General information only. Rialto Bridge articles describe patterns and considerations that may apply to a business; they are not financial, legal, tax or accounting advice, and they take no account of your particular circumstances. Consider your own situation and seek advice from a qualified professional before acting.

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