This calculator requires the use of Javascript enabled and capable browsers. This script is one of several termed as operational ratios. This measures the effectiveness to frequently turn the sales inventory during a given financial time period, as well as the buying and purchase guidelines; it can also be a flag as to what is in inventory. Is the inventory such that you can sell it; is it obsolete? All items should be considered and entered at cost. Enter the beginning and ending inventory value. Enter the annual costs of sales from inventory value, including cost of inventory, markdowns, losses, scapped items, warranty reductions, excluding all non-inventory sales. Finally click on Calculate to see the average inventory turnover ratio. Though not true for all businesses, the average inventory sold should turn at least 4 times annually; that is a ratio of 4 to 1. Different periods will have different ratios. The more times inventory turns over annually, the more profit you should make. Be aware that this is NOT the same as AR rollover or turnover. See our faster and easier Annual Inventory Turnover Ratio Calculator. Our example is intended to be for a typical small business year.
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