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Definition

A ratio which shows how quickly a company is turning over its stock. Obviously, companies are always trying to minimise the amount of stock which they hold, because it represents cash which could be in the bank and reducing their interest bill. Obsolete and out-of-date stock cut into profits and tie up working capital. The stock turn ratio is calculated by dividing the company's turnover by its stock figure from the balance sheet. A rising stock turn ratio indicates that the company may be becoming less efficient at managing its stock.

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