Operations
Turnover from cost of goods sold and average inventory
The standard form. Divide the cost of the stock sold by the average value of the stock held to get the number of turns.
The Formula
T = COGS / AVG
The standard form. Divide the cost of the stock sold by the average value of the stock held to get the number of turns.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| COGS | Cost of goods sold over the period | currency | The cost of the stock that was actually sold, never revenue, which contains the margin. |
| AVG | Average inventory | currency | The value of stock carried on average, normally the mean of opening and closing. |
| T | Inventory turnover | ratio | How many times the shelf emptied in the period. A ratio, with no units. |
What Each Symbol Means
COGScurrency
Cost of goods sold over the period
The cost of the stock that was actually sold, never revenue, which contains the margin.
AVGcurrency
Average inventory
The value of stock carried on average, normally the mean of opening and closing.
Tratio
Inventory turnover
How many times the shelf emptied in the period. A ratio, with no units.
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.