Calculate the gross sales of the firm by multiplying the number of units sold by the price of each unit. For example, 30 pizzas times $10 equals $300 in gross sales.
Subtract the expenses associated with the sales process to determine net sales. In the example, if each pizza had a $2 coupon, the net sales would be $240.
Calculate the average inventory by adding the number of units in inventory at the beginning of the period to the number of units at the end of the period and dividing the sum by two. For example, if the number of pizzas in inventory at the beginning of the day is 50 and the number of pizzas at the end of the day is 20, then the average inventory is 35.
Calculate the average inventory at cost by multiplying the average inventory by the value of each unit. For example, if the average inventory is 35 and the value of each unit is $10, the average inventory at cost is $350.
Calculate the ratio of inventory turnover by dividing the net sales of the firm by the average inventory at cost. Concluding the example, you would divide $240 by $350. The ratio of inventory turnover of the example is 0.68.