Average inventory

It is the average amount of inventories or stock in a financial period. The average might be calculated by adding opening and ending balances of inventories and then dividing by 2 or it might be calculated by taking the balances of different points of time ( e.g. 12 months) in a financial period and dividing by total number of points

Formula



Opening balance of inventories + Ending balance of inventories
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                                         2


OR on monthly basis



Inventories account balance at January 31 + inventories account balance at February 28 + ....+...+....+.........
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                                                      Number of months (say 12)