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


Opening balance of inventories + Ending balance of inventories

OR on monthly basis

Inventories account balance at January 31 + inventories account balance at February 28 + ....+...+....+.........

                                                      Number of months (say 12)