Inventory Turnover Calculator

The Inventory Turnover Calculator shows how many times you sell and replace your stock over a year, and how many days the average item sits on hand before it sells. You enter your cost of goods sold for the year and your average inventory, usually taken as the average of opening and closing stock at cost. The tool divides cost of goods sold by average inventory to give the turnover ratio, then divides 365 by that ratio to give days inventory outstanding. A higher turnover and a lower days figure generally point to lean, well managed stock that is selling steadily, while a low turnover can signal overbuying, slow sellers or obsolete items tying up cash. Retailers, wholesalers, manufacturers and their accountants use these measures to set ordering levels, to free up working capital and to compare performance against earlier periods or industry norms. A few good habits sharpen the result. Use cost of goods sold rather than sales revenue in the formula, because mixing sale prices with stock at cost overstates the ratio. Use a genuine average inventory across the year where you can, since a single year end figure can be misleading if stock is seasonal. Read the ratio alongside margin, because a very high turnover achieved through heavy discounting may not be the win it first appears. Track the trend over several periods and break it down by product line so you can act on the slow movers. Pair this measure with your cash conversion cycle to see how stock timing feeds into the cash your business has available.

Inventory turnover = cost of goods sold / average inventory. Days inventory = 365 / turnover. Estimate only, not financial or tax advice.