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Inventory turnover calculator

Inventory turnover is cost of goods sold divided by average inventory at cost. It shows how many times you sell through your stock in a period; days of inventory is the period divided by turnover.

$
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days
Inventory turnover
3.75×

For the period you entered.

Days of inventory
97 days
Annualised turnover
3.75×
Average inventory
$160,000

Working

  1. Average inventory: ($140,000 + $180,000) ÷ 2 = $160,000
  2. Turnover: $600,000 ÷ $160,000 = 3.75
  3. Days of inventory: 365 ÷ 3.75 = 97.3 days

Runs in your browser; nothing you enter is sent anywhere. Results are estimates from the numbers you provide.

The formula

Turnover = COGS ÷ average inventory; Days of inventory = days in period ÷ turnover

How it works

Both numbers must be at cost. Dividing sales at retail price by inventory at cost overstates turnover. Average inventory is usually the opening and closing balance, or better, the average of month-end balances if you have them.

A higher turnover means cash is tied up for less time, but too high can mean frequent stockouts. A lower turnover can mean overstock, slow lines or deliberate buying ahead of a peak.

Compare like with like: your own trend over time and similar categories, not a figure borrowed from a different kind of business.

Worked example

COGS for the year is $600,000. Opening inventory is $140,000 and closing is $180,000, so average inventory is $160,000. Turnover = 600,000 ÷ 160,000 = 3.75, which is about 97 days of inventory.

Watch out for

  • Using only the closing balance can mislead when you build stock before a peak. Average several points where you can.
  • A company-wide figure hides slow lines. Look at turnover by category or supplier, and use ABC analysis to find the tail.
  • If the period is not a year, the annualised figure scales it to 365 days. Seasonal businesses should not annualise a single peak month.

Frequently asked questions

What is a good inventory turnover ratio?
It depends on the product. Fast-moving consumables turn much faster than furniture or fashion with long lead times. Compare against your own history and similar businesses rather than a single benchmark.
Should I use sales or COGS?
Use cost of goods sold, because inventory is valued at cost. Using sales mixes retail prices with cost values and overstates turnover.
How is turnover different from days of cover?
Turnover looks back at what you sold relative to average stock over a period. Days of cover looks forward at how long current stock will last at the current rate of sale.

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