![]() inventory turnoverĭays sales of inventory (or days of inventory) calculates the average time it takes your business to turn inventory into sales. A high turnover means you’re selling through items efficiently, and a high sell-through means you’re turning over a high quantity of items. Your business needs to maximize both of these rates. (Quantity of goods sold / quantity of goods on hand) x 100 = sell-through rate It measures how much stock you sell in a given period (AMOUNT) as a percentage. Inventory turnover measures how many times you sell through and replace inventory (SPEED) in a specific period. This number will help inform how much stock you need to order in the future and how many sales you can expect to make throughout the next year. In this example, it takes 36.5 days to sell through your average inventory ($1,000 worth of books) one time. Take 365 days and divide it by 10 (your inventory turnover rate). From here, you can average out how many days it takes to sell through your inventory one time. In other words, you turned your inventory for that book ten times throughout the year. $10,000 (your COGS) / $1,000 (your average inventory) = 10 (your turnover rate) ![]() If we plug those numbers into the formula, we get: Your beginning inventory is $3,000, your ending inventory is $1,000-so your average inventory is $1,000 ($3,000 – $1,000 and then divided by 2). Let’s say you own a bookstore, and you’re trying to figure out inventory turnover for one of your best sellers. With those variables identified, you can now use this formula to calculate the inventory turnover rate:Ĭost of goods sold / average inventory = inventory turnover rate Inventory turnover ratio example Cost of goods sold (COGS) = the number on your annual income statement.Average inventory = (the dollar value of beginning inventory + ending inventory) / 2.Timeframe = 1 year (or whatever period you choose).To calculate inventory turnover, let’s define the variables: What is the inventory turnover ratio formula? inFlow now has an improved PO software system.Connecting to QuickBooks Online – set up, troubleshooting and FAQs.3 free barcode generators that are actually worth your time.Community Connect and learn from other inFlow customers.Webinars inFlow tips straight from our in-house experts.Blog inFlow updates and long-form articles for small businesses.Videos Inventory management advice without the whiteboard.Knowledge Base Got an inFlow question? Our KB has the answer.Become a Partner Refer inFlow to your clients and earn commission.Professional Services Hire an in-house expert to set inFlow up for you.Contact Sales Get expert advice and see if inFlow is the right fit for you.Get Support Need help? Contact the inFlow support team.Contact Sales Find out quickly if inFlow is right for you.Printer Barcode label printers from inFlow.Accessories Smart accessories for your Smart Scanner.Smart Scanner The complete solution for running your operations.Talk to Sales Find out quickly if inFlow is right for you. ![]()
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