what is average inventory 
average inventory is a calculation that estimates the value or number of a particular good or set of goods during two or more specified time periods average inventory is the mean value of inventory within a certain time period which may vary from the median value of the same data set and is computed by averaging the starting and ending inventory values over a specified period understanding average inventoryinventory is the value of all the goods ready for sale or all of the raw materials to create those goods that are stored by a company successful inventory management is a key focal point for companies as it allows them to better manage their overall business in terms of sales costs and relationships with their suppliers since two points do not always accurately represent changes in inventory over different time periods average inventory is frequently calculated by using the number of points needed to more accurately reflect activities across a certain amount of time for instance if a business was attempting to calculate the average inventory over the course of a fiscal year it may be more accurate to use the inventory count from the end of each month including the base month the values associated with each point are added together and divided by the number of points in this case 13 to determine the average inventory the average inventory figures can be used as a point of comparison when looking at overall sales volume allowing a business to track inventory losses that may have occurred due to theft or shrinkage or due to damaged goods caused by mishandling it also accounts for any perishable inventory that has expired the formula for average inventory can be expressed as follows average inventory current inventory previous inventory number of periodsaverage inventory is used often in ratio analysis for instance in calculating inventory turnover investopedia zoe hansenmoving average inventorya company may choose to use a moving average inventory when it s possible to maintain a perpetual inventory tracking system this allows the business to adjust the values of the inventory items based on information from the last purchase effectively this helps compare inventory averages across multiple time periods by converting all pricing to the current market standard this makes it similar to adjusting historical data based on the rate of inflation for more stable market items it allows simpler comparisons on items that experience high levels of volatility example of average inventorya shoe company is interested in better managing its inventory the current inventory in its warehouse is equal to 10 000 this is in line with the inventory for the three previous months which were valued at 9 000 8 500 and 12 000 