The Cost of Ending Inventory formula, also known as the Cost of Goods Sold formula, is used to determine the total cost associated with closing out a company’s inventory at the end of an accounting period. This formula can help companies understand their inventory costs and more accurately track their financial performance over time. It involves summing up the cost of purchases and manufacturing during a certain period and subtracting from that total the closing inventory figures of the same period. In other words, it presents a business’s total cost for its ending inventory for a specific time period. By using this formula, businesses can measure their liquidity and stay on top of their inventory costs.