**How To Calculate Average Inventory For Inventory Turnover Ratio**. Inventory turnover rate = cost of goods sold / average inventory. Cost of goods sold / average inventory or sales / inventory.

Firstly, we will calculate the cost of goods sold. As the inventory turnover ratio is greater than 1, it implies efficient management of inventory in the company. The cost of products sold is divided by the average inventory for the same time period to compute inventory turnover.

Table of Contents

### Let’s Make Sure We’re All Working With The Same Definitions For Each Of These Component Parts.

Keeps a check with the industry standards of inventory turnover ratio. Inventory turnover ratio = $97,000.00 / $36,500.00. Inventory turnover ratio = cost of goods sold ÷ average inventory.

### The Figure Is Calculated By Dividing The Cost Of Goods By Average Inventory.

Apply the formula for calculating inventory turnover. Inventory turnover = cogs / average inventory; The formula for calculating the inventory ratio is the cost of goods sold divided by average inventory.

### The Steps For Calculating The Inventory Turnover Ratio Are:

How to calculate the inventory turnover ratio? Identify cost of goods sold (cogs) over the accounting period. Inventory turnover rate = cost of goods sold / average inventory.

### Inventory Turnover Ratio = Cost Of Goods Sold / Average Inventory.

You can’t stock a lifetime supply. All the production costs of the goods, often shortened to cogs. To calculate the inventory turnover ratio, cost of goods sold (cogs) is divided by the average inventory for the same period.

### Inventory Turnover Ratio = 2.66.

Take the cost of goods sold (cogs) within a given period. The asset turnover ratio is calculated by dividing net sales by average total assets. Had the denominator been higher than the numerator, it would mean an inventory pile.