1. What is Inventory Turns?

Inventory turns (also known as inventory turnover) is a financial ratio that 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:

• \( \text{COGS} \) — Cost of Goods Sold (dollars)
• \( \text{Average Inventory} \) — Average inventory value during the period (dollars)

Example: $100,000 COGS / $20,000 Average Inventory = 5 turns per year

3. Importance of Inventory Turns Calculation

Details: Inventory turns is a critical metric for assessing inventory management efficiency, identifying slow-moving items, optimizing cash flow, and improving overall operational performance. Higher turns generally indicate better inventory 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 your inventory turns over per year.

5. Frequently Asked Questions (FAQ)

Q1: What is a good inventory turns ratio?
A: It varies by industry, but generally higher is better. Retail typically has 4-6 turns, while manufacturing may have 8-12 turns annually.

Q2: How do I calculate average inventory?
A: Average inventory = (Beginning Inventory + Ending Inventory) ÷ 2 for the period being analyzed.

Q3: Why is high inventory turns important?
A: Higher turns indicate efficient inventory management, reduced holding costs, better cash flow, and less risk of obsolescence.

Q4: What causes low inventory turns?
A: Overstocking, poor demand forecasting, slow-moving products, or inadequate inventory management practices.

Q5: How can I improve inventory turns?
A: Implement better demand forecasting, optimize reorder points, reduce lead times, eliminate slow-moving items, and improve supplier relationships.