1. What is the Inventory Turnover Ratio?

The Inventory Turnover Ratio measures how many times a company's inventory is sold and replaced over a period. It indicates how efficiently a company manages its inventory and converts it into sales.

2. How Does the Calculator Work?

The calculator uses the Inventory Turnover formula:

Where:

• \( \text{COGS} \) — Cost of Goods Sold (USD)
• \( \text{Avg Inv} \) — Average Inventory (USD)

Explanation: The ratio shows how many times inventory is turned over during a specific period. A higher ratio indicates better inventory management and sales performance.

3. Importance of Inventory Turnover Ratio

Details: This ratio is crucial for assessing inventory management efficiency, identifying slow-moving inventory, optimizing stock levels, and improving cash flow management.

4. Using the Calculator

Tips: Enter COGS and Average Inventory values in USD. Both values must be positive numbers. The calculator will compute the turnover ratio instantly.

5. Frequently Asked Questions (FAQ)

Q1: What is a good inventory turnover ratio?
A: The ideal ratio varies by industry. Generally, a higher ratio is better, but it should be compared with industry benchmarks and historical performance.

Q2: How often should inventory turnover be calculated?
A: Typically calculated annually, but can be calculated quarterly or monthly for more frequent monitoring of inventory performance.

Q3: What does a low turnover ratio indicate?
A: A low ratio may indicate overstocking, slow-moving inventory, or poor sales performance, which can tie up capital and increase storage costs.

Q4: Can turnover ratio be too high?
A: Extremely high ratios may indicate stockouts, lost sales opportunities, or inadequate inventory levels to meet customer demand.

Q5: How to improve inventory turnover ratio?
A: Strategies include better demand forecasting, inventory optimization, promotional sales, and improving supply chain efficiency.