■ Total value of the inventory sold during this fiscal year: $550,000. Let’s assume that a company has a cost of sold goods of $500,000, while its initial inventory balance is evaluated at $250,000 and its inventory balance at the end of the fiscal year is $200,000. Inventory turnover ratio Cost of the goods sold / Average or the ending inventory. Thus, these acquisitions are most probably made at higher purchasing prices. The formula to calculate inventory turnover ratio is. Or it may indicate inefficiency in the way the business plans its acquisiton and production, which means that it frequently makes purchases in small quantities of materials. either the company has a proper approach on its strategy on sales which finally results in a strong liquidity
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