Average Inventory Calculation is a measure of the average number of inventory items a business has on hand during a given period. It’s calculated by taking the total dollar value of inventory at the beginning of the period, adding the total value of all inventory purchases made during the period, and subtracting the value of any inventory sold in the same period. The resulting figure is then divided by two to give the Average Inventory Calculation. This calculation allows businesses to understand how much stock they are likely to have in order to meet customer demand, as well as manage their working capital more effectively.