1. What is Inventory Turns?

Inventory Turns, also known as inventory turnover, measures how many times a company's inventory sells and is replaced over a specific period. It indicates the efficiency of inventory management and sales performance.

2. How Does the Calculator Work?

The calculator uses the Inventory Turns formula:

Where:

• \( COGS \) — Cost of Goods Sold ($)
• \( Average\ Inventory \) — Average inventory value over the period ($)

Explanation: This ratio shows how efficiently inventory is being managed by comparing the cost of goods sold to the average inventory level.

3. Importance of Inventory Turns Calculation

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

4. Using the Calculator

Tips: Enter COGS and Average Inventory in dollars. Both values must be positive numbers. The result shows how many times inventory sells per period.

5. Frequently Asked Questions (FAQ)

Q1: What is a good inventory turnover ratio?
A: It varies by industry, but generally higher ratios indicate better performance. Typical ranges are 4-6 for manufacturing and 8-12 for retail.

Q2: How is average inventory calculated?
A: Average inventory is typically calculated as (Beginning Inventory + Ending Inventory) ÷ 2 for the period.

Q3: What does a low inventory turnover indicate?
A: Low turnover may indicate overstocking, slow-moving items, or poor sales performance, which ties up capital.

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

Q5: How often should inventory turnover be calculated?
A: It should be calculated regularly (monthly, quarterly, or annually) to monitor inventory management efficiency over time.