The formula to calculate the Inventory to Sales Ratio is:
\[ \text{ISR} = \frac{I}{S} \]
Where:
The Inventory to Sales Ratio (ISR) is a measure of the amount of inventory a business has compared to its sales. It helps businesses understand how efficiently they are managing their inventory. A high ISR indicates that a company has more inventory than it is selling, which could suggest overstocking or slow sales. Conversely, a low ISR indicates that a company is selling its inventory quickly, which could suggest efficient inventory management or high demand.
Let's consider an example:
Using the formula to calculate the Inventory to Sales Ratio:
\[ \text{ISR} = \frac{500}{250} = 2 \]
This means that the Inventory to Sales Ratio for this scenario is 2, indicating that the company has twice as much inventory as it has sales.
