Insert the information in the form and the calculator will determine the inventory turnover ratio.

What is the inventory turnover ratio?

The inventory turnover ratio is a financial ratio that tells how many times a comapny has sold and replaced inventory during a specific period of time.

How to calculate inventory turnover ratio?

To calculate inventory turnover ratio you should use the following formula:
inventory turnover ratio = cost of goods sold (COGS) / average value of inventory

example: company x had a cost of sales of $4,600,000 and an inventory of $630,000 in the second year and an inventory of $520,000 in the first year, calculate the inventory turnover ratio and the days inventory?

Using the following formulas the answer will be:
inventory turnover ratio = cost of goods sold / average value of inventory
inventory turnover ratio = $4,600,000 / (($630,000 + $520,000) / 2)
inventory turnover ratio = 8
days inventory = 365 / 8
days inventory = 45 days

Why use inventory turnover ratio?

The inventory turnover ratio is used to help a company in making smarter decisions about pricing, marketing, manufacturing and purchasing. simplay the inventory turnover ratio measures how good the company is at generating sales from it's stock.