What is the Cost of Goods Sold to Inventory ratio Template and why is it important in a business plan for a small business like A Touch of Tuscany?

The Cost of Goods Sold to Inventory ratio template gives a small business owner like Jack Gordon the ability to present the ratio between the cost of goods sold by a small business like A Touch of Tuscany, to the its Inventory. This ratio is also known as the Inventory turnover ratio and is very useful in idenfitying just how effectively the business is able to turnover its inventory during the year. The template gives the reader a numerical as well as graphic view of what the ratio is projected to be for the three years for which the financials in the business plan are being projected.

What calculations go into the Cost of Goods Sold to Inventory ratio template in a business plan for a Full Service Restaurant?

There are only two items that have to be entered in the Cost of Goods Sold to Inventory ratio template. The first is of course the cost of goods sold. In the event you are a new business you will have to estimate the gross margins that you anticipate in the years ahead and arrive at the cost of goods sold number by multiplying the inverse of the gross margins to the projected sales figure for each year. In the event you are an established business, you can always take a look at your existing cost of goods sold and project that forward after accounting for a slight inflation in the components. Also remember that in the case of a service business like a mortgage broker or realtor, there will be little or no cost of goods sold calculated separately like in manufacturing - instead in service industries the cost of goods sold will be included in the operating expenses.

The second item that has to be entered into the Inventory Turnover ratio template is the Inventory. We recommend that in the case of a new business you throw in an estimate of what your inventory will be like whereas in the case of an established business, you can always project out the inventory based on what you past inventory cycles have been.

Once these two items have been entered by you, Inventory Turnover ratio template will automatically calculate the ratio for the three years for which the financials are being projected and update the chart accordingly. You can then click on the output tab and copy and paste that directly into your business plan word document.

Quick Links:

1. Go to the Corresponding Questionnaire section for this industry.
2. Go to the Corresponding Business Plan section for this industry.