![]() ![]() Your Average Inventory (AI) is a calculation (or a very good estimate) of the value of your company’s inventory over a set period of time. Step 1: Calculate Your Average Inventory (AI) Keep in mind each time period is different depending on the industry, so periods will range from yearly to quarterly or monthly.Ĭost of Goods Sold is also known as Cost of Sales or Cost of Services. There are a few steps to calculating your inventory turnover, including first calculating your Average Inventory and Cost of Goods Sold. Are you selling inventory quickly or does the majority of your inventory tend to sit in the warehouse? Should you be ordering more inventory to increase sales? Should you try to market your merchandise differently? When you know your inventory turns ratio, it will be easier to confidently answer these questions.īut first, you need to know how to calculate your inventory turnover ratio. Knowing how to properly understand and calculate your inventory turnover can lead to promising news for your business.
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