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.

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Cost of goods sold ($)

Average inventory ($)

5.00x

Inventory turnover

Days inventory73.0 days

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

How it works

Divide your cost of goods sold by your average inventory to get the turnover ratio, the number of times stock cycles in a year. Divide 365 by that ratio to get the average days an item is held.

Worked example

With cost of goods sold of $600,000 and average inventory of $120,000, turnover is $600,000 divided by $120,000, which is 5.00x. Dividing 365 by 5 gives 73.0 days inventory.

Related calculators

Days Inventory Outstanding Calculator: how long stock sits.
Economic Order Quantity Calculator: ideal order size.
Cash Conversion Cycle Calculator: days cash is tied up.
Gross Profit Calculator: total gross profit.

Frequently asked questions

Should I use sales or cost of goods sold?

Use cost of goods sold, because average inventory is recorded at cost. Using sales revenue, which includes your margin, would overstate the turnover ratio. Keeping both figures on a cost basis gives a true comparison.

How do I find average inventory?

The usual method is to add your opening and closing inventory at cost and divide by two. For businesses with seasonal swings, averaging several month end balances gives a more reliable figure. Use the same basis each period so trends stay comparable.

Is a higher inventory turnover always better?

Usually a higher turnover means stock is selling well and cash is not tied up, but very high turnover can risk stockouts and lost sales. It can also reflect heavy discounting that hurts margin. Balance turnover against service levels and profitability.