INVENTORY / A master list of products that are located in a store or building. Inventory is often done in retail locations to determine a store's shrink percentage (total items on-hand versus the book count of items that should be on-hand). These numbers help determine a store's shoplifting rate and misdirect items from delivery trucks.
The Retail Inventory Method is an estimation of on-hand inventory based on the relationship of the retail price of the merchandise as well as the cost.
To find the average inventory rate use the following equation:
Note that the average math calculation makes comparisons of inventory through time. Calculations are usually made in increments of a month or the 13 month marking the fiscal year.
For more information on retail math, head over to our quick guide
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