1. What is Inventory Turnover?

Inventory turnover is a ratio showing how many times a company has sold and replaced inventory during a given period. A higher turnover indicates better sales and more efficient inventory management.

2. How Does the Calculator Work?

The calculator uses the inventory turnover formula:

Where:

• \( Sales \) — Total sales revenue for the period
• \( Average Inventory per Item \) — Average value of inventory held during the same period

Explanation: The ratio measures how efficiently inventory is being managed by comparing sales to inventory levels.

3. Importance of Inventory Turns

Details: Inventory turnover is a key metric for assessing operational efficiency, identifying slow-moving items, and optimizing purchasing and stocking strategies.

4. Using the Calculator

Tips: Enter sales and average inventory values in dollars. Both values must be positive numbers for accurate calculation.

5. Frequently Asked Questions (FAQ)

Q1: What is a good inventory turnover ratio?
A: Ideal ratios vary by industry. Higher is generally better, but too high may indicate stockouts.

Q2: How often should I calculate inventory turns?
A: Typically calculated monthly, quarterly, or annually depending on business needs.

Q3: Should I use cost or retail value for inventory?
A: Most businesses use cost value for more accurate financial analysis.

Q4: What causes low inventory turnover?
A: Overstocking, poor sales, obsolete inventory, or incorrect purchasing decisions.

Q5: How can I improve my inventory turnover?
A: Better demand forecasting, just-in-time inventory, promotions for slow movers, and regular inventory reviews.