“How many times are you turning over your inventory?”
The question is asking how well you’re using your precious capital. Like…if you’re barely turning over your inventory, then you probably didn’t need to hold as much of it. You sell after-market bike tires. You run a bike shop. Did you really need to buy and then store and risk being stolen 4,000 bike tires when you only sell, on average, 40 a month? Yes, they were a “great deal” at 20% off, but if your cost of capital is 12%, then to rent the capital to keep those tires is costing you something close to 40 tires a month in interest (1% of 4,000 is 40 tires; 12 months in a year in most states).
So then...no, it was not at all a good deal. Next time just buy the tires as ya need ‘em.
See: JIT Inventory.
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finance a la shmoop. what does per-capita mean? well there's poor capita yeah this
guy, how would you like to be named capita and then there's per capita which [man sits under a tree]
just means well technically per head. yep comes from Latin like oh so many
things salsa dressing and dancing among others, the word decapitation comes to [dancing feet]
mind. like what happens when those flying human taxi drones get too far to the
left or when King Henry got tired of a wife. so if that happened often it had [helicopter prop]
throw off the per capita calculations. and same deal if we suddenly had a lot
of two-headed people being born like the aliens in men in black and whole bunch
other Hollywood movies. per capita is a useful metric in a bunch of financial
calculations. a common set is GDP or gross domestic product per capita .like
if you have a ton of GDP say ten trillion dollars from your country [100 dollar bill]
whateverstan, if you only have a million people that's a ton of production
productivity. but if you're say China with well over a billion people well
then it's a much lower GDP per capita. the calculations get quoted when talking
about things like cell phone monthly subscriptions, computer ownership or [people crowd around a cell phone]
particularly rollicking house parties. so yeah the notion of per capita is pretty
important but don't stress if you're not an expert yet. it's a nothing to lose
your head over. [man carries head]
Up Next
Inventory turnover...way less delicious than an apple turnover. So...what is it?