![]() It also states that it would take Luxurious Furniture Company approximately 3 years to sell its entire inventory or complete one turn. This means that it only sold roughly a third of its inventory during the current year. Inventory Turnover Ratio = $1,000,000 / $3500000Īs you can see, Luxurious Furniture Company’s turnover is.Inventory Turnover Ratio = Cost of Goods Sold/ Average Inventory.Then, we calculate the Inventory Turnover Ratio using the Formula. Average Inventories = Beginning Inventories + Ending Inventories) / 2.You can download this Inventory Turnover Ratio Template here – Inventory Turnover Ratio Template This enables you to measure how often the average inventory ratio is sold or turned in during a particular period. The inventory turnover ratio is a simple ratio that helps to show how effectively inventory can be managed by comparing average inventory and the cost of goods sold for a particular period. The inventory turnover ratio is a ratio that shows how many times a company has replaced and sold inventory during a period, say one year, five years, or ten years. It shows how fast a company can replace a current period batch of inventories and transform it into sales to find a balance that is right for your business. ![]() The inventory turnover ratio and an efficient ratio formula are important. The Inventory Turnover Ratio Formula helps you find a balance that is right for your business and will lead to making a profit in business. Start Your Free Investment Banking Courseĭownload Corporate Valuation, Investment Banking, Accounting, CFA Calculator & others Inventory Turnover Ratio Formula
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