Inventory and operations
Inventory valuation, stock counts, turnover and slow-moving items, reordering
What you will find in this section
Inventory valuation by weighted average and first in, first out, periodic versus perpetual stocktaking, inventory turnover and spotting slow-moving stock, cost of goods sold and profit margin, and the reorder point and safety stock.
Inventory valuation methods: weighted average cost and first in, first out (FIFO)
The same goods and the same sales, but a different profit depending on the valuation method. One example explains weighted average cost and FIFO, and why LIFO is not permitted.
Inventory and operationsPeriodic vs. perpetual inventory: which one suits your business?
Do you know your cost of sales every day, or do you wait until year-end? A practical comparison of the two systems, with the example of a pharmacy that uncovers a shortage that a periodic system would never have revealed.
Inventory and operationsInventory turnover and slow-moving stock: how to find the money frozen on your shelves
How many times a year do you sell through your inventory? And how many riyals have been sitting on the shelves for months? Calculating turnover, days of inventory and the aging report, with an auto parts example.
Inventory and operationsCost of goods sold and profit margin: the difference between margin and markup
Adding 25% to cost does not give you a 25% profit margin. Learn the difference between margin and markup, the conversion formulas, and how to price an item correctly.
Inventory and operationsReorder point and safety stock
When should you order an item from the supplier before it runs out? The reorder point and safety stock formulas, calculated two ways, with examples from a pharmacy and an auto parts store.