Calculate Inventory Turn Over Ratio
Calculating & Tracking Inventory Turn over helps businesses make smarter decisions in variety of areas including pricing, manufacturing, marketing, purchasing and warehouse management.
Inventory includes all goods, raw or finished, that a company has in stock with the intent to sell.
Inventory turnover is the rate that inventory stock is sold, or used, and replaced.
The inventory turnover ratio is calculated by dividing the cost of goods by average inventory for the same period.
A higher ratio tends to point to strong sales and a lower one to weak sales. Conversely, a higher ratio can indicate insufficient inventory on hand, and a lower one can indicate too much inventory in stock.
Cost of Goods Sold divided by Inventory
Average Inventory = (Beginning Inventory + Ending Inventory) / 2