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Author: BuyanHold Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 3916  
Subject: Re: Inventory Turnover formula Date: 6/8/2000 12:39 PM
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thalseth wrote:

The most accurate inventory turnover is based on COGS, not sales, which are stated at market prices. The
inventory is carried at cost, which correlates with COGS. If sales are used, it overstates the calculated turnover.
Additionally, the inventory should be averaged and not just use the one figure from the balance sheet.

I hope this helps.


Tom, yes it helps and thank you for your input. I am averaging inventory over two reporting periods since this was suggested in one of the financial books I'm reading. However, since it wasn't proposed by TMF, I wasn't sure of its "accuracy". You've validated it for me - thanks!

Karen :)
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