Inventory Ratio Calculator

Formula

The formula to calculate the Inventory Ratio (IR) is:

\[ IR = \frac{COGS}{AI} \]

Where:

(IR) is the Inventory Ratio
(COGS) is the Cost of Goods Sold
(AI) is the Average Inventory

What is an Inventory Ratio?

An Inventory Ratio is a financial metric that measures the number of times a company’s inventory is sold and replaced over a period. A higher ratio indicates that the company is selling goods quickly and efficiently, while a lower ratio may suggest overstocking or issues with the product.

Example Calculation

Let's assume the following values:

Cost of Goods Sold (COGS) = $500,000
Average Inventory (AI) = $100,000

Using the formula:

\[ IR = \frac{500,000}{100,000} = 5 \]

The Inventory Ratio (IR) is 5.