Free tool · Money & pricing
Inventory turnover calculator
Inventory turnover is cost of goods sold divided by average inventory — how many times you sell through your stock in a period. Enter COGS and your beginning and ending inventory to get the turnover ratio and days sales of inventory, the average number of days an item sits before it sells.
Inventory turnover
6×
Stock sells through about every 61 days.
- Average inventory
- $40,000
- Days sales of inventory (DSI)
- 60.8 days
- Turns per year (annualized)
- 6
Formulas
- Average inventory = (Beginning inventory + Ending inventory) ÷ 2
- Inventory turnover = COGS ÷ Average inventory
- Days sales of inventory = Days in period ÷ Inventory turnover (365 for a year)
Worked example: a small gift shop
A gift shop's cost of goods sold for the year was $240,000. Inventory at cost was $45,000 on January 1 and $35,000 on December 31, so average inventory is $40,000.
Turnover = $240,000 ÷ $40,000 = 6.0. Days sales of inventory = 365 ÷ 6 = 60.8 days — the typical product sits on the shelf for about two months.
Why it matters for cash
Inventory is cash sitting on shelves. If the gift shop could sell the same volume at a turnover of 8 instead of 6, its average inventory would fall to $30,000 — freeing $10,000 for marketing, a loan payment or a cash buffer.
Use inventory at cost, not retail price, so it matches COGS. Retail-priced inventory makes turnover look lower than it is.
Raising turnover without running out
- Order smaller quantities more often once a supplier relationship is reliable; minimum order quantities are the main constraint.
- Mark down slow movers early — dead stock costs storage and ties up cash.
- Reorder bestsellers based on sales data rather than gut feel.
- Calculate turnover by category: a fast-selling candle line can hide a jewelry case that has not moved in a year.
Very high turnover is not automatically good; it can mean frequent stockouts and lost sales.
Frequently asked questions
How do you calculate inventory turnover?
Divide cost of goods sold for the period by average inventory, where average inventory is beginning plus ending inventory divided by two.
What is a good inventory turnover ratio?
It varies widely by industry — grocery and fresh food turn far faster than furniture or jewelry. Compare your ratio with your own past periods and with businesses selling similar products.
How do you calculate days sales of inventory?
Divide the number of days in the period by the turnover ratio. A turnover of 6 for a year means 365 ÷ 6 = about 61 days.
Should I use sales or COGS for inventory turnover?
Use COGS, because inventory is recorded at cost. Using sales inflates the ratio by your markup.