![]() In this example, it takes 36.5 days to sell through your average inventory ($1,000 worth of books) one time. Take 365 days and divide it by 5 (your inventory turnover rate). From here, you can average out how many days it takes to sell through your inventory one time. In other words, you turned your inventory for that book ten times throughout the year. $10,000 (your COGS) / $2,000 (your average inventory) = 5 (your turnover rate) If we plug those numbers into the formula, we get: Your beginning inventory is $3,000, and your ending inventory is $1,000-so your average inventory is $2,000 ($3,000 + $1,000 and then divided by 2). Let’s say you own a bookstore, and you’re trying to figure out inventory turnover for one of your best sellers. With those variables identified, you can now use this formula to calculate the inventory turnover rate:Ĭost of goods sold / average inventory = inventory turnover rate Inventory turnover ratio example
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