Inventory Turnover Calculator
Calculate inventory turnover ratio and days sales of inventory from COGS and inventory values.
Enter COGS and inventory values, then click calculate.
What This Calculator Does
This calculator determines how efficiently a business sells and replaces its inventory by computing the inventory turnover ratio and days sales of inventory (DSI). Higher turnover indicates efficient inventory management, while low turnover may signal overstocking or slow-moving products.
The Formula
Inventory turnover measures how many times per year a company sells through its entire inventory. Average inventory is calculated as (beginning + ending inventory) / 2. A ratio of 6 means inventory is sold and replaced six times annually, equivalent to approximately 61 days of inventory on hand.
Step-by-Step Example
Enter annual COGS
Cost of goods sold for the year from your income statement. Example: $500,000.
Enter inventory values
Beginning of year inventory ($80,000) and end of year inventory ($100,000). Average: $90,000.
Review turnover metrics
Turnover ratio: 5.56x. Days to sell: 65.7 days. Assessment: Average with room for improvement.
Real-World Use Cases
Inventory Optimization
Identify slow-moving products that tie up capital and warehouse space, and adjust ordering accordingly.
Cash Flow Management
Higher turnover frees up cash that would otherwise be locked in inventory sitting on shelves.
Supplier Negotiation
Use turnover data to negotiate just-in-time delivery terms that reduce the need for large inventory investments.
Common Mistakes to Avoid
Using revenue instead of COGS. Turnover should be calculated with cost, not selling price, to avoid inflating the ratio.
Comparing turnover ratios across different industries. A grocery store (turnover 12-20x) operates very differently from a jewelry store (turnover 1-3x).
Not calculating average inventory. Using only ending inventory can be misleading if inventory fluctuates significantly during the year.
Frequently Asked Questions
Accuracy and Disclaimer
Inventory turnover benchmarks vary significantly by industry. This calculator provides a general assessment. Consult with your accountant or industry associations for specific benchmarks relevant to your business.
Related Calculators
Gross Margin Calculator
Calculate gross profit, gross margin percentage, and markup from revenue and cost of goods sold.
Use CalculatorBusiness FinanceContribution Margin Calculator
Calculate contribution margin per unit, ratio, total contribution, and break-even from price and variable costs.
Use CalculatorBusiness FinanceMarkup vs Margin Calculator
Convert between markup and margin percentages and calculate selling price from cost using either method.
Use Calculator