Average Inventory Calculator Explained:
(a) What is this? Average Inventory is how much money you typically have in stock.
(b) What does this tell me? This tells you, on average, the value of the stock that a business typically holds. Note that it is an average and it is not a stock take, or representative of any particular time, rather it is just the average.
(c) Why should I use it? To allow you to determine your stock turn and to help you manage how much stock the business has.
(d) Caution: This is an average. Businesses must monitor how much stock they have on hand and ensure it is appropriate. A higher or lower number is not necessarily good or bad. The number will vary depending on sales. Stock needs accurate and tight management. Average Inventory needs to be used with other measures such as GP$, GP% and Net Profit.