The closing inventory for the last period (e.g last year) is the beginning inventory for this period. So you will take the closing inventory from the old period and the closing inventory from this period and get the average.
It's so cool, thank you! May I ask why COGS/Average Inventory = IT, so if IT is expected to be high, then COGS is also expected to be high right? But is it good for the COGS to be high, bc it means production cost is high, or maybe is it related to high sales?
You're right. COGS here shows sales level. IT could be high if COGS (sales) are high or Average Inventory is low. It's an efficiency metric that shows if the cash invested in inventory is being cycled optimally. If it's too low, it means a lot of cash is trapped in idle inventory, which is not an efficient use of cash. If IT is too high, however, it might signify very low inventory levels at the business, which could lead to lost sales. It's a good practice to compare IT level to benchmarks, because it differs from retail segment to another. Sorry, not sure what cumulated issues are.
