Definition of imply for English Language Learners. : 1  to express (something) in an indirect way : to suggest (something) without saying or showing it plainly. : 2  to include or involve (something) as a natural or necessary part or result.
It is calculated as: Cost of Goods Sold Ã· Average Inventory. Or. Sales Ã· Inventory. Usually, a higher inventory turnover ratio is preferred, as it indicates that more sales are being generated given a certain amount of inventory.
This results in a cost-to-retail ratio, or cost ratio, of 80%. To arrive at the estimated ending inventory at cost, we multiply the estimated ending inventory at retail ($10,000) times the cost ratio of 80% to arrive at $8,000. Because the material covered here is considered an introduction to this topic, many complexities have been omitted.