1. What is LIFO Inventory Turnover?

The LIFO (Last-In, First-Out) Inventory Turnover ratio measures how many times a company's inventory is sold and replaced over a period. It's calculated by dividing the cost of goods sold by the average inventory during the period.

2. How Does the Calculator Work?

The calculator uses the LIFO Inventory Turnover formula:

Where:

• \( COGS \) — Cost of Goods Sold during the period
• \( \text{Average Inventory} \) — (Beginning Inventory + Ending Inventory) / 2

Explanation: A higher ratio indicates efficient inventory management, while a lower ratio may indicate overstocking or obsolescence.

3. Importance of Inventory Turnover

Details: Inventory turnover is a key efficiency ratio that helps businesses assess their inventory management, pricing strategy, and overall operational efficiency.

4. Using the Calculator

Tips: Enter COGS and average inventory in dollars. Both values must be positive numbers. The calculator will compute how many times inventory was turned over during the period.

5. Frequently Asked Questions (FAQ)

Q1: What's a good inventory turnover ratio?
A: It varies by industry. Higher is generally better, but too high might indicate insufficient inventory levels.

Q2: How does LIFO affect inventory turnover?
A: LIFO typically results in higher COGS and lower ending inventory values during inflation, which may increase the turnover ratio compared to FIFO.

Q3: How often should I calculate inventory turnover?
A: Typically calculated annually, but can be done quarterly for more frequent monitoring.

Q4: What causes low inventory turnover?
A: Overstocking, poor sales, obsolete inventory, or incorrect pricing strategies.

Q5: How can I improve my inventory turnover?
A: Better demand forecasting, inventory management systems, promotions for slow-moving items, or adjusting purchasing quantities.