LAPSE

LAPSE:2019.1351
Published Article
LAPSE:2019.1351
Analysis of Inventory Turnover as a Performance Measure in Manufacturing Industry
Jin Kyung Kwak
December 10, 2019
Using an appropriate measure to assess firms’ performance is essential. We analyzed inventory turnover (IT) as a performance measure in manufacturing processes because IT ratios are critical in the manufacturing industry and publicly available objective measures. Using the data of 421 manufacturing companies in Korea from 2010 to 2018, we conducted an extensive analysis of the factors affecting IT by segment and its correlation with other financial ratios. Then, we compare performances between the top and bottom companies determined by Altman’s Z score approach. We found that, for the overall manufacturing industry, IT ratios were negatively correlated with gross margin and debt cost, but positively correlated with capital intensity, although the results varied by segment. Moreover, IT ratios did not show significant correlations with other financial ratios categorized for growth, profitability, stability, productivity, and value of companies. However, adjusted IT (AIT) can be a good indicator of firms’ performance in terms of financial sustainability. Results also revealed that the top 10% companies showed higher AIT ratios than the bottom 10% in most segments of the manufacturing industry. The analysis of this study can be a starting point to search for a composite index to evaluate manufacturing processes comprehensively.
Keywords
inventory turnover, manufacturing, performance, Renewable and Sustainable Energy
Suggested Citation
Kwak JK. Analysis of Inventory Turnover as a Performance Measure in Manufacturing Industry. (2019). LAPSE:2019.1351
Author Affiliations
Kwak JK: Ewha School of Business, Ewha Womans University, Seoul 03760, Korea
Journal Name
Processes
Volume
7
Issue
10
Article Number
E760
Year
2019
Publication Date
2019-10-17
Published Version
ISSN
2227-9717
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Original Submission
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PII: pr7100760, Publication Type: Journal Article
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LAPSE:2019.1351
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doi:10.3390/pr7100760
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Dec 10, 2019
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CC BY 4.0
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[v1] (Original Submission)
Dec 10, 2019
 
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Dec 10, 2019
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Original Submitter
Calvin Tsay
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