I am looking at the example spreadsheet. On it are the titles, assets, total assets, liabilities & Equity (3 subs under it) operating revenues, operating expenses, and on the last page it the net income from operations. Where in these sections would I go to calculate my inventory turnover?
To calculate your inventory turnover, you would need to look at the operating revenues and the average inventory figure. Here's how you can calculate it step-by-step:
1. Locate the "Operating Revenues" section in the example spreadsheet. This section will show the total revenues generated from the company's operations.
2. Look for the cost of goods sold (COGS) or the related expenses associated with the inventory. It may be listed under the "Operating Expenses" section. If not directly mentioned, common expenses that are typically included in COGS are cost of materials, direct labor, and direct overhead costs.
3. Calculate the average inventory over a specific period. This can be done by taking the sum of the beginning inventory and ending inventory, then dividing it by 2. The beginning and ending inventory figures can typically be found on the balance sheet under the "Assets" section.
4. Divide the COGS (or related expenses) by the average inventory calculated in step 3. This will give you the inventory turnover ratio.
The inventory turnover ratio indicates the number of times the company's inventory is sold and replenished within a given period. It helps assess the efficiency of inventory management and the company's ability to sell its goods.
To calculate inventory turnover, you need information on your operating revenues and average inventory. The formula for inventory turnover is:
Inventory Turnover = Operating Revenues / Average Inventory
Here's how you can find the necessary information in your example spreadsheet:
1. Look for the section or column that contains your operating revenues. Typically, this information is found in the "Operating Revenues" or "Revenue" column. Identify the specific cell that contains the total operating revenues for a given period (e.g., month, quarter, or year).
2. To calculate the average inventory, you will need the opening and closing inventory balances for the same period. Check if your spreadsheet includes these balances or a section dedicated to inventory.
- If the spreadsheet has a dedicated section for inventory, look for the cells that contain the opening and closing inventory balances.
- If your spreadsheet does not explicitly provide opening and closing inventory balances, you might need to calculate them manually. Locate the cells where the inventory balance is recorded at the beginning and end of the period. You can use the average of these two numbers as the estimate for average inventory.
3. Once you have identified the operating revenue and average inventory cells, you can perform the calculation to find your inventory turnover. Divide the operating revenues by the average inventory to get the inventory turnover.
Remember to adjust the time period of your operating revenue and average inventory calculation to maintain consistency in your analysis.