Inventory Turnover Calculator (Ratio and Days of Inventory)

What is inventory turnover?

Inventory turnover is how many times you sell through your average stock in a period. A turnover of 4 over a year means you sold the equivalent of your average inventory four times. The reverse view, days of inventory, tells you how long a typical unit sits on the shelf before it sells.

The inventory turnover formula

Average inventory = (starting inventory + ending inventory) ÷ 2
Inventory turnover = cost of goods sold ÷ average inventory
Days of inventory = days in the period ÷ inventory turnover

Value inventory at cost, and use the cost of goods sold (COGS) for the same period. Sales revenue includes your markup, so dividing it by an inventory value at cost overstates the ratio.

Worked example

A brand has $240,000 of COGS over a year. Its inventory was worth $50,000 on 1 January and $70,000 on 31 December.

Average inventory: (50,000 + 70,000) ÷ 2 = $60,000
Inventory turnover: 240,000 ÷ 60,000 = 4.0
Days of inventory: 365 ÷ 4 = 91 days (91.25 before rounding)

On average, a unit bought by this brand waits about three months before it sells.

What a good ratio looks like

There is no single good number. What counts as healthy depends on your category, how long your suppliers take, and whether you sell seasonally. A shop selling consumables will usually turn stock faster than one selling furniture.

Use the ratio to compare like with like:

Against your own history: is it rising or falling quarter to quarter?
Between your products: which SKUs turn slowly and tie up the most cash?
Against your lead time: stock that sits far longer than your lead time suggests you buy more per order than the wait requires.

A low ratio points to overstock or products that don’t sell, and money tied up in stock. A very high ratio can mean you sell stock as fast as it arrives, which risks a stockout when demand spikes or a supplier is late.

Why one average hides the problem

A single ratio for the whole business blends fast sellers and dead stock. A SKU that turns 12 times a year and another that turns once can average out to something that looks fine. Work it out per SKU or per product group to see which products to reorder sooner and which to stop buying.

Next steps

Slow SKUs: check how much you buy per order against how fast the product sells. See MOQ if a supplier’s minimum is forcing the quantity.
Fast SKUs: check they won’t run out before the next delivery. Use the reorder point calculator and the safety stock calculator.
Read the full definition in the inventory turnover glossary entry.

Frequently asked questions

What is the inventory turnover formula?

Inventory turnover = cost of goods sold ÷ average inventory. Average inventory is the inventory value at the start of the period plus the value at the end, divided by two. Use the same period for both numbers, such as a year or a quarter.

How do you calculate inventory turnover?

Take your cost of goods sold (COGS) for the period, add the opening and closing inventory values and halve them to get average inventory, then divide COGS by that average. A year with $240,000 of COGS and $60,000 average inventory gives a turnover of 4.

What is the inventory turnover ratio formula using sales?

Some sources divide net sales by average inventory instead. Sales include your markup, while inventory is valued at cost, so the sales version gives a higher ratio for the same stock. Use COGS when you can, and use the same version every time so the numbers stay comparable.

What is a good inventory turnover ratio?

It depends on what you sell. Fast-moving, low-cost or perishable goods turn over more often than bulky, high-value or seasonal goods. Compare your ratio with your own past periods and with similar products, not with a single number for every business.

How do you turn the ratio into days of inventory?

Divide the days in the period by the turnover ratio. A turnover of 4 over 365 days means stock sits for about 91 days on average before it sells.

Inventory turnover calculator