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# How is the inventory to sales ratio calculated in the app

**Inventory to Sales Ratio** is a financial metric that compares the amount of inventory a company holds to its sales over a specific period. This ratio helps businesses assess how well they are managing their inventory in relation to their sales volume.

## Terms and formula

* **SKU**: Stock Keeping Unit, a unique identifier for your product variants.

* **Inventory to sales ratio**: how many times the amount of inventory a company holds per sale over a specific period

```
[Average Inventory Value] / [Net Sales]
```

* **Average inventory value**: the average value of inventory during the period.

```
( [Begingin Inventory Value] + [Ending Inventory Value] ) / 2
```

* **Beginning inventory value**: The initial inventory at the cost of a specified historical period.

* **Ending inventory value**: The inventory at cost at the end of a historical period.

* **Net sales**: the net revenue excluding refunds, shipping fees, and taxes.