Gross Profit Margin

Business Lesson 1 - Estimating Inventory Value Using Gross Profit

Business Lesson 1 - Estimating Inventory Value Using Gross Profit

I love incorporating business principles almost as much as I love using technology. They both have played a big role in my business success. As a small business consultant, I’m often asked the best way to estimate the value of inventory. One method is based on gross profit. Warning – this post does come with a quiz at the end.

The gross profit method of valuing inventory is a technique using a company’s historical or projected gross profit margin to estimate cost of goods sold during a period. The gross profit method assumes the gross profit ratio remains stable during the period.