The Average Inventory at Retail

Every retail store must calculate average inventory.

The average inventory of any kind of retail store varies, but the number can be calculated using the same formula. Calculating the average inventory allows retailers to analyze the success of their store and the popularity of their products.

Average Inventory Formula

To calculate the average inventory of a retail store, add the inventory from the beginning of a given month to the inventory at the end of the same given month. Divide this number by two.

Average Inventory Uses

Knowing the average inventory allows retailers to see how fast products are turning a profit for the store as well as how quickly the store is adding inventory to its floor and stock rooms. This information allows retailers to create price and purchasing plans.

Other Uses

The formula can also be applied to an entire business year to compare inventory averages from year to year. When compared to annual profits, this information gives retailers an overall picture of the successes and failures of the store.

References

• Business Dictionary: Average Inventory Definition
• Principles of Accounting: Principles of Accounting