Operations
Average inventory from opening and closing stock
The two-point mean used when only the start and end of the period are known. Averaging removes the timing artefact of a single snapshot.
The Formula
AVG = (opening + closing) / 2
The two-point mean used when only the start and end of the period are known. Averaging removes the timing artefact of a single snapshot.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| opening | Inventory at the start of the period | currency | The balance carried into the period, valued at cost. |
| closing | Inventory at the end of the period | currency | The balance carried out of the period, valued on the same basis as the opening figure. |
| AVG | Average inventory | currency | On 55000 and 65000 this gives 60000.0, the denominator of the turnover ratio. |
What Each Symbol Means
openingcurrency
Inventory at the start of the period
The balance carried into the period, valued at cost.
closingcurrency
Inventory at the end of the period
The balance carried out of the period, valued on the same basis as the opening figure.
AVGcurrency
Average inventory
On 55000 and 65000 this gives 60000.0, the denominator of the turnover ratio.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate inventory turnover page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate Inventory Turnover, filed under Business. Every number the guide produces comes from substituting into this one line.