1. What is Inventory Turns?

Inventory turns, also known as inventory turnover, measures how many times a company's inventory is sold and replaced over a period. It indicates the efficiency of inventory management and how quickly goods are moving through the supply chain.

2. How Does the Calculator Work?

The calculator uses the Inventory Turns formula:

Where:

• \( COGS \) — Cost of Goods Sold (total cost of inventory sold during period)
• \( Average\ Inventory \) — Average inventory value during the period

Explanation: This ratio shows how efficiently a company is managing its inventory. Higher turns indicate better performance and faster inventory movement.

3. Importance of Inventory Turns Calculation

Details: Inventory turnover is crucial for assessing operational efficiency, identifying slow-moving inventory, optimizing stock levels, improving cash flow, and making informed purchasing decisions.

4. Using the Calculator

Tips: Enter COGS and Average Inventory in the same currency. Both values must be positive numbers. The result shows annual inventory turnover ratio.

5. Frequently Asked Questions (FAQ)

Q1: What is a good inventory turnover ratio?
A: Ideal ratios vary by industry. Generally, higher is better, but extremely high ratios may indicate stockouts. Compare with industry benchmarks for accurate assessment.

Q2: How do I calculate average inventory?
A: Average inventory = (Beginning inventory + Ending inventory) ÷ 2, typically calculated for annual periods.

Q3: What does low inventory turnover indicate?
A: Low turnover may suggest overstocking, poor sales, or obsolete inventory that needs attention.

Q4: Can inventory turnover be too high?
A: Yes, extremely high turnover might indicate insufficient inventory levels leading to stockouts and lost sales opportunities.

Q5: How often should inventory turnover be calculated?
A: Typically calculated annually, but can be calculated quarterly or monthly for more frequent monitoring and trend analysis.