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Annualized Return

Annualized return converts profit from one inventory cycle into a yearly rate, allowing direct comparison between products with different cycle lengths.

Why It Matters

•Normalizes performance across SKUs with different lead times and turnover speeds.
•Prevents bias toward products with high per-cycle profit but slow cycles.
•Critical for understanding the true financial attractiveness of each SKU.

Connection to Capital

Capital returns grow faster when both per-cycle profit and cycle frequency are optimized; annualization captures both dimensions.

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