SALES VARIANT
Sales to inventory ratio calculator.
The legacy retail variant. Sales over average inventory. Inflates the ratio by the gross margin. Useful internally, misleading against COGS-based benchmarks.
Why retailers historically used the sales variant
Retail accounting once tracked inventory at retail price. Dividing sales by retail-priced inventory produced a clean number on the same axis. Modern retail systems mark inventory at cost, removing the original convenience. The COGS-based ratio is now the GAAP-preferred reading.
Side-by-side comparison
INPUTS
READOUT
Sales-based ratio
6.0x
COGS-based ratio (preferred)
3.9x
Sales ratio overstates true turnover by 54% at a 35% margin.
When the sales ratio actively misleads
- Comparing against RMA or Damodaran medians (which are COGS-based).
- Inputs to debt-service or borrowing-base covenants.
- Multi-period trend reads where gross margin has shifted.