For inventory turnover, what data will be used, including how the data can be collected if necessary.

To analyze inventory turnover, the following data points are typically used:

1. Cost of Goods Sold (COGS):

   • This represents the total cost of manufacturing or purchasing the goods that were sold during a specific period.
   • Collection Method: COGS can be found on the income statement of a business. It can also be calculated using the formula: $\text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory}$

2. Average Inventory:

   • This is the average amount of inventory held over a specific period, calculated to provide a more stable measure than the ending inventory alone.
   • Collection Method: Average inventory can be calculated using the formula: $\text{Average Inventory} = \frac{\text{Beginning Inventory} + \text{Ending Inventory}}{2}$
   • Data for beginning and ending inventory can be taken from balance sheets or internal inventory records.

3. Inventory Turnover Ratio:

   • This ratio measures how many times inventory is sold and replaced over a period.
   • Formula: $\text{Inventory Turnover Ratio} = \frac{\text{COGS}}{\text{Average Inventory}}$

Data Collection Tips:

• Use accounting software or enterprise resource planning (ERP) systems to track purchases and sales which automatically update COGS.
• Regularly conduct inventory audits to ensure accurate tracking of stock levels.
• Maintain detailed records of inventory purchases and sales.

By combining these data points and collection methods, businesses can effectively calculate and analyze their inventory turnover ratios.