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Finance

Inventory Turnover Calculator

Find how many times you sell through your stock, how many days it sits, and how many weeks of supply you hold. Use cost of goods sold or sales, enter average inventory directly or from beginning and ending balances, set your own period length, add a carrying-cost estimate, or reverse-solve the inventory a target turnover needs.

Your details

Forward solves the ratio. Reverse finds the average inventory a target turnover allows.
Turnover should use COGS. If you only have sales, add your gross margin and we convert it to a cost basis.
The total cost of the inventory you sold over the period, not its selling price.
Average inventory is usually (beginning + ending) ÷ 2, all valued at cost.
Inventory valued at cost. Use the period average, not a single day.
Use 365 for a year, 90 or 91 for a quarter, 30 for a month. Some firms use 360.
days
Currency
Inventory turnoverHealthy turnover
6

Times stock sold per period

Days inventory outstanding60.8days
Weeks of supply8.7weeks
Average inventory used$100,000
Cost basis used$600,000
6 ×
Slow<2Below average2-4Healthy4-8Fast8-12Very fast12+

You turn your inventory 6× a period, about every 61 days.

  • Higher turnover ties up less cash in stock, but too high can mean lost sales from stockouts.
  • Healthy ranges vary widely by industry: grocery turns dozens of times a year, while jewelry may turn once or twice.
  • Use cost of goods sold, not revenue, so the numerator matches the cost basis of average inventory.

Next stepCompare this figure against the typical turnover for your specific industry before judging it.

Formula

turnover=COGSaverage inventoryDIO=days in periodturnover\text{turnover} = \dfrac{\text{COGS}}{\text{average inventory}}\qquad \text{DIO} = \dfrac{\text{days in period}}{\text{turnover}}

Worked example

COGS of $600,000 with beginning inventory $90,000 and ending $110,000 gives average inventory $100,000. Turnover is 600,000 ÷ 100,000 = 6.0 times per year, or 365 ÷ 6 ≈ 60.8 days (8.7 weeks) of stock. At a 25% carrying-cost rate, holding $100,000 of stock costs about $25,000 a year.

What inventory turnover measures

Inventory turnover counts how many times a business sells and replaces its stock over a period, usually a year. You divide the cost of goods sold by the average inventory held during that period. A turnover of 6 means the company cycled through the cost-equivalent of its average stock six times. A higher ratio generally signals strong sales and lean inventory, while a low ratio can point to overstocking, weak demand, or obsolete goods sitting on the shelf. Dividing the days in the period by the turnover gives days inventory outstanding, and dividing that by seven gives weeks of supply, the same idea expressed in the units planners often use.

COGS or sales, and how to find average inventory

Both the numerator and denominator should be stated at cost so the comparison is consistent. Cost of goods sold reflects what the sold inventory actually cost, not its selling price, which keeps margin out of the ratio. If you only have a revenue figure, switch the flow figure to sales and enter your gross margin: the calculator multiplies sales by one minus the margin to recover an approximate cost basis. For average inventory you can type the period average directly, or enter beginning and ending balances and let the tool average them. Businesses with strong seasonality get a more accurate denominator by averaging monthly or quarterly balances instead of just two snapshots.

Custom periods, carrying cost and reverse planning

The period length is yours to set: keep 365 for a full year, switch to 90 or 91 for a quarter, or 30 for a month, and some firms use a 360-day convention. Turn on the carrying-cost estimate to multiply your average inventory by an annual holding rate, commonly 20 to 30 percent once you account for capital, storage, insurance, shrinkage and obsolescence, which shows the real cash cost of sitting stock. The reverse mode flips the question: tell it a target turnover and it solves for the average inventory that target allows at your current cost of goods sold, which is useful when you are budgeting a stock level or negotiating a reorder cadence.

Reading the result in context

There is no universal good turnover number, it depends heavily on the industry and business model. Supermarkets and fresh-food retailers turn inventory many times a year because products spoil and margins are thin, whereas car dealers, furniture stores, and luxury goods turn far more slowly. The most useful comparison is against your own history and direct competitors. A falling ratio may warn of building dead stock, while a sharply rising ratio could mean you are running too lean and risking stockouts that cost you sales.

Typical inventory turnover by industry

IndustryTypical turnover (per year)Pace
Grocery & fresh food12-20 Very fast
Apparel & fashion retail4-8 Fast
Consumer electronics5-9 Fast
Restaurants (food stock)20-40 Very fast
Furniture & home goods3-6 Healthy
Automotive dealers2-4 Below average
Jewelry & luxury goods1-2 Slow

Approximate annual ranges, use as a rough benchmark, not a target.

Frequently asked questions

What is a good inventory turnover ratio?

It depends entirely on the industry. A turnover between roughly 4 and 8 is healthy for many retailers, but grocers may turn 15+ times a year while furniture or jewelry sellers turn only once or twice. Compare against your own past results and direct competitors rather than a single benchmark.

Should I use sales revenue or cost of goods sold?

Use cost of goods sold. Average inventory is valued at cost, so the numerator must also be at cost to be consistent. If you only have a revenue figure, switch the flow figure to sales and enter your gross margin, and the calculator converts revenue to an approximate cost basis before computing the ratio.

How do I calculate average inventory?

The standard method adds the beginning inventory and ending inventory for the period and divides by two, all valued at cost. This calculator does that for you if you choose the beginning-and-ending option. For businesses with strong seasonality, averaging monthly or quarterly balances gives a more accurate figure than just two snapshots.

How do I reverse-solve for a target turnover?

Switch the mode to reverse, enter your cost of goods sold and the turnover you want to hit, and the calculator divides the two to show the average inventory level that target allows. It also reports the matching days inventory outstanding and weeks of supply so you can sanity-check the stock plan.

What is inventory carrying cost?

Carrying cost is what it costs to hold stock for a year: the capital tied up, plus storage, insurance, shrinkage and obsolescence. It commonly runs 20 to 30 percent of the inventory value per year. Turn on the estimate to multiply your average inventory by a rate you choose and see the annual cost of slow-moving stock.

Sources

Written by Sarah Klein, CFP Certified Financial Planner · Chicago, USA

Fifteen years translating mortgage tables and amortization schedules into decisions that actually help real borrowers.

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