Inventory Turnover Ratio

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The Inventory Turnover Ratio computes the inventory turnover ratio based on the beginning and end inventories and the cost of goods.

INSTRUCTION: Choose units and enter the following:

(CoG) Cost of Goods
(BI) Value of Beginning Inventory
(EI) Value of End Inventory

Inventory Turnover Ratio (ITR): The calculator returns the ratio as a real number. However this can be automatically converted to a percent via the pull-down menu.

The Math / Science

The Inventory Turnover Ratio reveals how many times inventory turns over (is sold and replaced) in a period. The formula for inventory turnover ratio

ITR = CoG/((BI+EI)/2)

where:

ITR = Inventory Turnover Ratio
CoG = Cost of Goods
BI = Beginning Inventory
EI = Ending Inventory

Some definitions of Inventory Turnover use Net Sales instead of Cost of Goods Sold.

Ratios that that trend lower should be investigated -- they may reveal slow moving inventory.

The Accounting Ratio Calculator provides numerous standard equations used in business accounting, including the following:

Best Possible Days Sales Outstanding - gives useful insight into delinquencies, as it considers only Current Receivables.
Current Ratio - A liquidity ratio that measures the ability to pay short-term liabilities.
Days Sales Outstanding - tests the efficiency of the conversion of receivables into cash.
Debt to Equity Ratio - measures how a company is leveraging its debt against the resources of its owners.
Inventory Turnover Ratio - reveals how many times inventory turns over in a period
Net Cash Flow from Operations - Net income - Increase in Receivables + Increase in Payables.
Quick Assets - cash and assets that can be converted quickly to cash
Quick Ratio (aka Acid Test) - measures the ability to pay short-term liabilities with cash and assets quickly convertible to cash
Stockholder's Equity - sum of Common Stock at Par, Premium on Common Stock, Preferred Stock at Par, Premium on Preferred Stock and Retained Earnings

Retail Calculator

Average Inventory is computed by dividing the sum of the merchandise inventory taken during one year by the number of such inventories.
Asset(/Stock) to Sales Ratio is used to compare how much in assets a company has relative to the amount of revenues the company can generate using their assets.
Quick Ratio aka Acid Test is a liquidity ratio that measures the ability to pay short-term liabilities with cash and assets quickly convertible to cash.
Break-Even Analysis equation shows the point in business where the sales equal the expenses.
Cost of Goods Sold is simply the difference between the cost of goods available for sale and the ending inventory.
Gross Profit is the difference between the net sales (or revenue) and the cost of goods or services sold. It is also known as the gross margin or Sales profit.
Gross Profit Percentage is the difference between the net sales and the cost of goods sold (or services rendered) divided by the net sales times a hundred.
Gross Profit Margin measures how much of each sales dollar is used to finance the direct inputs required to manufacture or merchandise the product sold.
Gross Margin Ratio equation is used to compute the profitability of a company on selling its inventory or merchandise.
Gross Margin Return on Investment [GMROI] calculation can be used to measure the performance the entire shop, but it is more effective if used for a particular department or category of merchandise.
Inventory Turnover Ratio reveals how many times inventory turns over (is sold and replaced) in a period.
Initial Markup % is the comparison of the amount of money, expressed as a percentage of initial cost, that a retailer adds to the price of goods.
Maintained Markup reveals the impact of markdowns (reductions) on the Initial Markup.
Maintained Markup Percentage is the percentage of net sales.
Markup is the difference between cost of a good or service and its selling price.
Net Sales is the sales revenue less sales returns and allowances and sales discounts.
Open-To-Buy is the difference between how much inventory is needed and how much is actually available.
Reductions are the combined cost of making a specified product/service cheaper or less in amount.
Retail Price is the price at which the manufacturer recommends that the retailer sell the product.
Sales per Square Foot is most commonly used for planning inventory purchases.
Sell-Through Rate/Analysis is the selling activity of a product within a defined period of time.
Total Stock Return is the appreciation in the price plus any dividends paid, divided by the original price of the stock.