The stock to sales ratio is a way to determine the relationship between how much stock or inventory is on hand and how much is selling. Ideally, retailers want to keep this rations low as possible – but if the ratio is too low the likelihood of Stock Out increases. For example, if a stock to sales ratio is 5:1, there is $100 worth of inventory for every $20 worth of merchandise sold. Formula: Stock-to-Sales = Beginning of Month Stock ÷ Sales for the Month
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