Next, divide COGS by average inventory to find our inventory turnover.(0.5 million + 0.3 million)/2 = an average of $0.4 million in inventory. At the end of the year, we had $0.3 million worth of beans. Let's say that, in our example, at the beginning of the year we had $0.5 million worth of coffee beans stored as inventory in our warehouses.If you use more than two data points, add all of the values together, then divide by the number of data points to find your average.

However, using additional data points in between can give you a more accurate value for your average. The simplest way to find this is to add your starting inventory value for the time period you chose to your ending inventory value and divide by two. Your average inventory is the average monetary value of all of the goods you have sitting on warehouses and on store shelves that haven't been sold during a given time period. Next, divide COGS by your average inventory value during the time period you're analyzing. This article has been viewed 357,037 times.ĭivide your COGS by your average inventory. In this case, 100% of readers who voted found the article helpful, earning it our reader-approved status. WikiHow marks an article as reader-approved once it receives enough positive feedback. Mack Robinson College of Business and an MBA from Mercer University - Stetson School of Business and Economics. She holds a BS in Accounting from Georgia State University - J. Keila spent over a decade in the government and private sector before founding Little Fish Accounting. With over 15 years of experience in accounting, Keila specializes in advising freelancers, solopreneurs, and small businesses in reaching their financial goals through tax preparation, financial accounting, bookkeeping, small business tax, financial advisory, and personal tax planning services.

Keila Hill-Trawick is a Certified Public Accountant (CPA) and owner at Little Fish Accounting, a CPA firm for small businesses in Washington, District of Columbia. This article was co-authored by Keila Hill-Trawick, CPA.

Inventory turnover ratio