The Formula for Average Inventory is a business calculation used to measure the average amount of inventory that a company holds throughout an accounting period. It is calculated by taking the total value of a company’s inventory at the beginning and end of an accounting period, adding them together, and then dividing the sum by two. This formula allows companies to better understand their overall inventory costs and helps inform key business decisions. Understanding your average inventory can help you decide when it’s time to order more stock, when it’s time to adjust pricing, and when it may be time to look into reducing expenses. Ultimately, keeping track of your average inventory can help you stay competitive in a rapidly changing marketplace.