What the result shows
How many times average inventory sold through in the period, the average inventory behind it, and how many days stock waits before it sells.
Inventory Turnover Ratio Calculator
Find how many times you sell through your inventory in a period and how many days stock sits before it sells.
Measure how fast stock sells
Use inventory values at cost and cost of goods sold for the same period, such as a year or a quarter.
Inventory turnover for the period
6.0x
Average inventory sold through about 6.0 times in 365 days, so stock waits about 60.8 days before it sells.
- Average inventory at cost
- $100,000
- Days of inventory on hand
- 60.8 days
- Cost of goods sold per day
- $1,644
See how long money sits on your shelves.
How it is calculated
Average inventory is beginning plus ending inventory at cost, divided by two. Divide cost of goods sold by average inventory for turnover, then divide the days in the period by turnover for days on hand.
How to use it
Compare turnover by product and over time rather than with a single benchmark. Slow turnover ties up money in stock, while very fast turnover can mean stockouts and lost sales.
Worked example
A store sold stock that cost $600,000 over the year. It started the year with $120,000 of inventory at cost and ended with $80,000, so average inventory was $100,000. Dividing $600,000 by $100,000 gives an inventory turnover of 6.0. Over 365 days, that means stock waits about 60.8 days before it sells.
What this result leaves out
Two inventory counts give a rough average. Seasonal peaks, product mix, stock in transit, and write-offs during the period are not included.
Before you use the result
What is the inventory turnover ratio?
It shows how many times a store sells through its average inventory in a period. Divide cost of goods sold by average inventory at cost. A higher ratio means stock sells faster and less money sits on shelves.
How do you calculate inventory turnover?
Add beginning and ending inventory at cost and divide by two for average inventory. Then divide cost of goods sold for the same period by that average. $600,000 of cost of goods sold over $100,000 of average inventory gives a turnover of 6.0.
How do you convert inventory turnover into days?
Divide the number of days in the period by the turnover. A yearly turnover of 6.0 gives 365 divided by 6, about 61 days of inventory on hand. That is roughly how long stock waits before it sells.
Should inventory turnover use sales or cost of goods sold?
Use cost of goods sold, because inventory is valued at cost. Dividing sales by inventory at cost mixes selling prices with cost prices and makes turnover look faster than it is.
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