Inventory turns tell you how long stock sits; the payment calculator tells you what financing that stock costs. Invented figures show each formula.
Inventory holding cost calculator, worked by hand for a Watertown, SD fabricator's steel rack
Holding cost is what it costs to keep stock on hand for a year: the money tied up, storage, insurance and the material that is damaged or lost. A shop can state it as a share of average inventory value.
In an invented example, a fabricator carries $96,330 of steel on its racks on average and puts its invented carrying share at 21.5% a year. The invented holding cost is then $20,710.95 a year.
If part of that stock is financed, the interest is one piece of the holding cost. The calculator on this page shows that piece for a stock order; storage, insurance and damage are added by hand.
Reorder point for a Watertown, SD auto repair shop's brake pads, worked by hand
The reorder point is the count at which the next order goes out, so new stock arrives before the shelf is empty. The formula is daily use times supplier lead time, plus safety stock.
In this invented case, a repair shop uses 6 sets of brake pads a day, its supplier takes 4 days to deliver, and it keeps 9 sets as safety stock. The invented reorder point is 6 times 4, plus 9: 33 sets.
Lead time is the number to check most. If the supplier slips by a day, the safety stock covers it; if it slips by several, raise the safety stock.
Inventory turnover ratio in Watertown, SD: what a sit-down restaurant compares month to month
Inventory turnover is cost of goods sold divided by average inventory for the same period. A restaurant works it monthly on food, since food spoils.
An invented restaurant has $18,265 of food cost in a month and keeps $4,135 of food on hand on average, which gives an invented turnover of 4.42 for the month. Over a 30-day month, that invented ratio means food sits about 6.8 days on average.
A restaurant compares the ratio from one month to the next. A falling ratio can point to over-ordering; a jump can point to tight shelves. Codington County, SD's 2023 CBP tally of full-service restaurants with a payroll is 29.
An inventory turnover calculator online, and the payment calculator on this page, for Watertown, SD shops
Turns over a year work the same way as the restaurant's month. Online inventory turnover calculators take the same two inputs, cost of goods sold and average inventory, and some add days on hand. Average inventory is the starting count plus the ending count for the period, divided by two, at cost rather than at shelf price.
Higher turns mean stock sells and is replaced more times a year, so less cash sits on the racks. Lower turns are not always a problem: a fabricator that buys steel by the truckload for its supplier's price may accept fewer turns in exchange for a lower cost per foot. The point is to know the number before financing the next order.
| Step | Formula | Invented result |
|---|---|---|
| Turns per year | Cost of goods sold / average inventory | $412,770 / $96,330 = 4.28 |
| Days on hand | 365 / turns | about 85 days |
| Holding cost | Average inventory x carrying share | $20,710.95 |
Days on hand tie the turns to financing: a term shorter than about 85 invented days means installments come due before an average invented order has sold. The calculator on this page takes Amount ($), Interest rate (annual %) and Term (months) and returns the estimated monthly payment, total interest and total repaid.
Worked by hand with the same formula, an invented $31,485 stock order at 13.07% over 6 months has an invented payment of $5,449.34 and $1,211.04 of interest. Enter your own figures to see yours. Retail trade is the largest sector by establishment count in ZIP 57201, with 184 employer establishments in 2023 (ZBP).
By Whitespring Funding Group ยท Updated