Definition

Stock to sales ratio measures the value of your inventory versus your number of sales. Your stock to sales ratio helps you understand how much working capital you have tied up in inventory for a specific period of time, and how that compares to your revenue from sales.

Formula

Stock to sales ratio = $ inventory value / $ sales value

How can I use this metric for my business?

Your goal should be to achieve a stock to sales ratio that is healthy for your business, rather than the lowest possible one. If your stock to sales ratio is lower than you’d like, it is possible that you are stocking out and aren’t consistently holding enough inventory to meet customer demand.