![]() See the formula below.Ĭost of Goods Sold = Beginning Inventory Value + Value of Any Inventory Purchased during the period – Ending Inventory Value Your Total Retail Sales-Front End Retail Gross=Cost of SalesĪnother way to calculate your Cost of Goods Sold, is to add the total value of your beginning inventory, plus inventory purchased and subtract any inventory that remains to be sold. If it’s not, take your Retail Sales for the time period, minus your front-end retail gross and that equals your Cost of Sales. At many dealerships, a Cost of Sales number may already be calculated for you. Your Cost of Goods Sold or Cost of Sales is the total value of all the inventory you sold in the given period. In automotive, your Cost of Goods Sold, may be labeled “Cost of Sales” on financial documents in dealerships. Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory Valueĭon’t know your Cost of Goods Sold or Average Inventory Value? Help is here. The ratio is typically used to help you understand the number of times your inventory fully turns over in a year, said differently it’s the number of times you would need to purchase the average inventory you hold per year. Given that it’s expressed as a ratio, finding your inventory turnover is a matter of doing some basic math. Right now, you are asking yourself, “How should I calculate my inventory turnover ratio?” How to Find Your Inventory Turnover Ratio Maybe even on a smaller timescale than that, and this goes for your new and used vehicle inventory.Īnd when you look at inventory turnover, you may be wondering “How can I improve my merchandising and inventory turns?”īut that’s jumping ahead. You’re looking at annual inventory turn, quarterly, monthly. You and your sales managers probably spend a lot of time considering your inventory turnover. Dealers have also changed how they make business decisions, too. ![]() People don’t shop for cars the same way they did a few years ago, and dealerships don’t sell cars the same way (or at least they shouldn’t). The automotive retail business has changed a lot in recent years.
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