The formula for gross profit is sales-cost of goods sold=gross profit. For example, an item purchased for $8 and sold for $10 results in a gross profit of $2.

Now, if the beginning inventory for the period is $35,000 and the ending inventory is $40,000 , divide that $75,000 by two to get an average inventory of $37,500 . Your cost of sales is $80,000 .

The periodic inventory method is easy to implement; businesses see it as a more straightforward calculation and allow them to make fewer record-keeping transactions.

The retail inventory method should only be used when there is a clear relationship between the price at which merchandise is purchased from a wholesaler and the price at which it is sold to ...

To calculate inventory turnover ratio, divide cost of goods sold by average inventory over a period of time. A higher ratio is usually better than a lower one.

A company can then divide the days in the period, typically a fiscal year, by the inventory turnover ratio to calculate how many days it takes, on average, to sell its inventory.

The retail inventory method should only be used when there is a clear relationship between the price at which merchandise is purchased from a wholesaler and the price at which it is sold to ...