Return on Inventory Calculator

Calculate the efficiency of your inventory management by comparing the cost of goods sold to average inventory value.

Input Parameters

Calculation Results

Calculation Formula

Return on Inventory = (COGS / Average Inventory) × 100%

Where:
- COGS (Cost of Goods Sold): Total cost of goods sold during the period
- Average Inventory: Average value of inventory during the period

Return on Inventory Calculator Usage Guide

Learn how to use the Return on Inventory Calculator and understand its implications for business

How to Use This Calculator

  1. Enter your Cost of Goods Sold (COGS) - this is the total cost of the inventory that was sold during a specific period.
  2. Enter your Average Inventory Value - this is typically calculated as (Beginning Inventory + Ending Inventory) / 2.
  3. Click the "Calculate" button to see your Return on Inventory percentage.
  4. Read the interpretation to understand how your inventory performance compares to industry standards.

Understanding Return on Inventory

The Return on Inventory (also known as Inventory Turnover Ratio) measures how efficiently a company uses its inventory to generate sales. It indicates how many times a company's inventory is sold and replaced over a period.

A higher Return on Inventory percentage is generally better as it means the company is selling its inventory more frequently, which reduces holding costs and minimizes the risk of inventory obsolescence.

Interpretation Guidelines

  • 25% or higher: Excellent performance, indicating efficient inventory management.
  • 15-25%: Good performance, suggesting effective inventory practices.
  • 5-15%: Average performance, warranting attention to inventory optimization.
  • < 5%: Poor performance, indicating potential issues with inventory management that should be addressed.

Practical Applications

This calculator can help you:

  • Identify inventory management strengths and weaknesses
  • Compare your performance with industry benchmarks
  • Make data-driven decisions about inventory levels
  • Identify opportunities for cost reduction