Average Stock

Average stock is a retail metric that represents the average amount of inventory a retailer has on hand over a certain period of time. It's an important measure because it helps retailers understand their investment in inventory relative to sales performance.

 

To calculate average stock, you can use the following formula:

 

This formula assumes that inventory levels fluctuate between two points in time (usually the beginning and end of a month or year). However, for a more accurate measure over time, you might calculate average stock by taking the sum of inventory levels at the end of each month (or another period) divided by the number of periods.

 

Average stock is important for retailers because it helps them make informed decisions about purchasing and inventory management. By knowing the average stock, retailers can identify trends, optimize stock levels to meet customer demand without overstocking, and improve cash flow management. It also plays a role in calculating other key performance indicators, such as inventory turnover and gross margin return on investment (GMROI).