Enter the total starting value of an inventory, the net purchases, and the cost of goods sold to calculate the ending inventory and turnover.

Ending Inventory Formula

The following formula can be used to calculate the ending inventory value. 

Ending Inventory = (BI+ NP) - (CG)
  • Where BI is the initial inventory amount ($)
  • NP is the net purchases ($)
  • CG is the cost of goods sold ($)

To calculate the ending inventory, sum the beginning inventory and net purchases, then subtract the cost of goods sold.

The inventory turnover can than further be calculated using the ending inventory, beginning inventory, and cost of goods sold.

Ending Inventory Definition

An ending inventory is defined as the total value of an inventory of goods after a certain time period of sales.

How to calculate Ending Inventory?

How to calculate Ending Inventory

  1. First, determine the initial inventory value

    This will involve taking a count of every piece of inventory that is currently stored and multiplying it by the price of those goods. This will yield the initial inventory value.

  2. Next, determine the total net purchases

    This will be equal to the total number of items sold multiplied by the price of those items.

  3. Find the cost of the goods sold

    This is the cost, including operating and raw material costs of a good.

  4. Finally, calculate the ending inventory

    Enter the information from steps 1-3 into the formula or calculate above to determine the ending inventory value.

FAQ

What is ending inventory?

An ending inventory is a monetary value used to describe the total worth of a warehouse or storage of goods after a certain number of those goods have been sold.

What is inventory turnover?

Inventory turnover is a ratio that measures the change in the value of an inventory over time. The higher the inventory turnover, the more product is being shipped or sold out.

What is a good ending inventory?

The lower the ending inventory the more goods are being sold. This will result in higher profits.