The logic and thinking behind this K.P.I is very similar to that of annual Stock Turn except that it is calculated by a slightly different method.
Let's day that you have 54 used vehicles in stock. the example above shows that each one of your vehicles sells every 35 days. Obviously, some of your vehicles will sell quicker than this and some will sell slower, the average being 35 days.
Now let's say that when you sell a vehicle you retain an average Gross Profit of R1,200 per unit. Armed with this information you can say that each of your 54 vehicles will produce a Gross profit of R1,200 every 35 days.
Example:
A) Number of days in 1 year = 365 B) Annual Stock Turn = 10.4 C) Days Stock Turn = 35 days (A ÷ B)
Discussion:
You can now see from this example that the faster your days Stock Turn, the quicker you will get your hands on your profit and therefore less money will be absorbed in costs.