Inventory per square foot

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Inventory per square foot is calculated by dividing total inventory by the total square footage

This metric is often used in the retail industry to provide an indication by how much inventory the company has on average. It allows for comparison across companies of different size while a pure total inventory value does not -- the largest retail company is expected to have a much larger inventory than a small sized company.

A company with a high inventory per square foot is often viewed negatively since it has a large amount of its capital sitting on shelves and not creating value. This means that the cost of purchasing and/or creating these goods could have been invested elsewhere and decrease inventory. Companies end up with unusually high inventory per square foot values due to a slump in consumer demand.

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