Inventory turnover shows how many times a business sells and replaces its stock in a period. Divide cost of goods sold by average inventory to get the ratio, then convert it to days of inventory to see how long stock sits before it sells.
Enter your figures below. Results update as you type and can be copied or shared as a link.
Inventory Turnover Calculator
Enter your numbers to see the result.
Estimates for planning only. Results depend on the accuracy of the inputs and the assumptions of the standard formula.
How inventory turnover is calculated
The standard formulas are:
- Average inventory = (beginning inventory + ending inventory) / 2
- Inventory turnover = cost of goods sold / average inventory
- Days of inventory = days in period / inventory turnover
Use cost of goods sold, not revenue, so that both sides of the ratio are valued at cost. For seasonal businesses, an average of monthly inventory balances is more accurate than two end-points.
Worked example
A distributor has cost of goods sold of $1,200,000 for the year, starting inventory of $180,000 and ending inventory of $220,000.
- Average inventory = ($180,000 + $220,000) / 2 = $200,000
- Inventory turnover = $1,200,000 / $200,000 = 6.0 times per year
- Days of inventory = 365 / 6.0 = about 61 days
Stock is, on average, sold and replaced every two months.
How to read the result
A higher turnover generally means stock moves faster and less cash is tied up. A very high figure can also point to stockouts or lost sales if shelves are often empty. A low figure can signal overstocking, slow-moving items or obsolete stock.
Compare the ratio with your own history and with businesses that sell similar products, because normal turnover differs widely between grocery, spare parts and fashion. Segment by product class where possible: an average across all items hides both fast and dead stock.
To improve turnover, teams usually look at forecast accuracy, reorder rules, supplier lead times and assortment size. See our guides on inventory and warehousing for related methods.
Common questions
What is a good inventory turnover ratio?
There is no single good number. Perishable goods turn many times a year, while capital equipment turns slowly. A good ratio is one that is stable or improving against your own history, without causing stockouts, and that sits in a sensible range for similar businesses in your sector.
Should I use sales or cost of goods sold?
Use cost of goods sold. Inventory is recorded at cost, so dividing sales revenue by inventory would inflate the ratio by the profit margin. Using COGS keeps numerator and denominator on the same valuation basis and makes comparisons between periods fair.
What is the difference between inventory turnover and days of inventory?
They describe the same speed in two ways. Turnover counts how many times stock is sold and replaced in a period. Days of inventory converts that count into the average number of days a unit sits before it sells, which many planners find easier to picture.
Why does my turnover change when I switch from yearly to monthly figures?
A monthly COGS divided by average inventory gives a monthly turnover, which is roughly one twelfth of the yearly figure. The speed is the same, but the period is different. Always state the period, and match the day count when you convert to days of inventory.
Can inventory turnover be too high?
Yes. Very high turnover can mean stock is too lean, with frequent stockouts, rushed orders and lost sales. Check service levels alongside the ratio. If fill rate is falling while turnover rises, the business may be trading customer service for lower stock.