Inventory Turnover Ratio Report - field explanation

Based on Inventory Audit Records

What Is Inventory Turnover?

Inventory turnover is a financial ratio showing how many times a company turned over its inventory relative to its cost of goods sold (COGS) in a given period. A company can then divide the days in the period, typically a fiscal year, by the inventory turnover ratio to calculate how many days it takes to sell its inventory, on average.

A relatively low inventory turnover ratio may be a sign of weak sales or excess inventory, while a higher ratio signals strong sales but may also indicate inadequate inventory stocking.

Where is the Report?

INV > report manager > advanced reports > standard > Inventory Turnover Ratio
Key in date range to cover OR it will use your current Ledger Period and 11 ledger periods back.

ITEM NUMBER

The location-item number of the inventory item

DATE

If you answer YES to “Show Daily Calculations?”, each day that there are audit records that meet the criteria of changing QUANTITY ON HAND, you will see the daily transaction totals that are used for the final calculations.

TRANSACTIONS

The number of Audit records for that day that affected on hand change.
(This would exclude Invoice price changes and PO/SO and cost adjustments because they do not affect the On Hand quantity)

COST OF SALES/USAGE

This is the value of the transaction count documents.
If the audit record had an affect the LOWERED the Quantity on Hand, the value of those documents is included in this total
(so take note of the rule "if the audit record LOWERED the quantity" so voids of invoices would raise the quantity and inv adjustments that increase quantity and value would be excluded from this.....but a stock addition that had a correction that lowered quantity would be included in this value)

AVERAGE ON HAND VALUE

there are 5 records in a day

each audit record has an end of day balance.

add up all these end of day balances.

divide by the number of records.

If the Number is negative, that is because you had negative inventory value (invoices in before stock additions)

Five stock additions for $1000 each

+ first audit record says ending balance is $1000

+ second audit record says ending balance is $2000

+ third audit record says ending balance is $3000

+ Fourth Audit record says ending balance is $4000

+ fifth audit record says ending balance is $5000

---------------------------------------------------------

$1000 + $2000 +$3000 + $4000 + $5000 = $15,000

divided by 5 audit records for that day

Equals $3000
....the avg on hand balance for that day.

TURN – Inventory Turn Over Ratio

Turn - Cost of sales / average on hand value

DSI – Daily Sales of Inventory

DSI - avg on hand value / cost of sales x number of days in your date range filter

Days sales of inventory (DSI) is the average number of days it takes for a firm to sell off inventory. DSI is a metric that analysts use to determine the efficiency of sales. A high DSI can indicate that a firm is not properly managing its inventory or that it has inventory that is difficult to sell.

Total Cost of Sales/Usage

It’s the total of all the detail. Each Days Cost of Sales/usage…added up into total amount for the number of days the report was run.

Total Average on Hand Value

This is the total of all the daily value added together, then divided by the number of daily balance records. for example, the report above has 8 days of balance changes. Add up each days Average on Hand Value and divide by 8 daily records, the ending value is $53,422.12