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Inventory Turnover Ratio Calculator - Glossary:
Using our inventory turnover ratio calculator, helps to compare, measure, understand the overall health of the business.
Inventory Turnover Ratio:
Shows the proportion of Cost of Goods Sold (COGS) to Average Inventory.
In simple words, is a key measure for evaluating how efficient the business is at managing its inventory and generating sales.
How to calculate?
Inventory Turnover Ratio = Cost of Goods Sold (COGS)/Average Inventory
The values are commonly stated against accounts inventory in the balance and net sales in income statement.
Average Inventory = (Beginning Inventory + Ending Inventory)/2
Cost of Goods Sold (COGS):
Cost of goods sold (COGS) is total cost to produce goods and services such as cost of materials, wages and other expenses related to producing a goods and service.
Inventory is the finished goods that can be sold immediately.
An average of Inventory value at the beginning of the year and inventory value at the end of the year.
A company with a cost of goods (COGS) of $225,000, beginning inventory of $20,000 and ending inventory of $25,000 will have inventory turnover ratio of 10 times. It means that the company sold its entire inventory within 36.5 days period.
It is an accounting ratio that helps a company to determine how much of its money tied up in inventory.
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