1. What is Monthly Inventory Turns?

Monthly Inventory Turns is a financial ratio that measures how many times a company's inventory is sold and replaced over a one-month 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 Monthly Turns formula:

Where:

• \( \text{Monthly COGS} \) — Cost of Goods Sold for the month ($)
• \( \text{Average Inventory} \) — Average inventory value during the month ($)

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

3. Importance of Monthly Turns Calculation

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

4. Using the Calculator

Tips: Enter Monthly COGS and Average Inventory in dollars. Both values must be positive numbers. The result is expressed as a unitless ratio.

5. Frequently Asked Questions (FAQ)

Q1: What is a good monthly inventory turnover ratio?
A: Ideal ratios vary by industry, but generally higher ratios indicate better inventory management. Retail typically aims for 2-6 monthly turns.

Q2: How is Average Inventory calculated?
A: Average Inventory = (Beginning Inventory + Ending Inventory) ÷ 2 for the month.

Q3: Why use COGS instead of sales?
A: COGS represents the actual cost of inventory sold, providing a more accurate measure of inventory efficiency than sales revenue.

Q4: What does a low monthly turnover indicate?
A: Low turnover may suggest overstocking, slow-moving inventory, or poor sales performance.

Q5: How often should I calculate monthly turns?
A: Monthly calculation helps track trends and make timely inventory adjustments to optimize working capital.