Inventory Turnover Calculator: Ratio and Days
Learn how to calculate inventory turnover from your cost of goods sold and the inventory you held at the start and end of a period. You also get days sales of inventory, so you can see how long stock sits before it sells.
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Formula
Average inventory = (beginning inventory + ending inventory) ÷ 2Inventory turnover = COGS ÷ average inventoryDays sales of inventory = days in the period ÷ turnover- Guidance scales turnover to a year (
turnover × 365 ÷ days): under 4 suggests overstock, 4 to 12 is typical, over 12 suggests stock-out risk. These are rules of thumb; healthy levels depend on the industry.
Worked example
COGS 600,000, inventory 90,000 at the start and 110,000 at the end, over 365 days. Average inventory is 100,000, so turnover is 600,000 ÷ 100,000 = 6 and days sales of inventory is 365 ÷ 6 = 60.8 days. At 6 a year the stock is moving at a typical pace.
Another example
COGS 240,000 over 365 days, inventory 50,000 at the start and 70,000 at the end. Average inventory is 60,000, so turnover is 240,000 ÷ 60,000 = 4 and days sales of inventory is 365 ÷ 4 = 91.3 days. At 4 a year it sits at the lower edge of the typical band.
When to use it
Use it to spot overstock that ties up cash, to compare product lines or periods, and to set purchasing targets. Pair it with margin: fast turnover on thin margins can still be the better business than slow turnover on high margins.
Rules of thumb
Healthy turnover depends heavily on the industry: grocery and fresh goods turn over very quickly, while furniture, jewellery and machinery turn over slowly. This page flags under 4 a year as possible overstock and over 12 as stock-out risk, as a generic guide only.
Common mistakes
- Using sales instead of cost of goods sold, which inflates the ratio.
- Using only year-end inventory when stock is seasonal. Average several months if you can.
- Comparing across industries.
How it differs
Turnover measures how fast stock sells. The EOQ calculator sets how much to order, the reorder point calculator sets when, and the working capital calculator shows the cash tied up in inventory.
Frequently asked questions
How do you calculate inventory turnover?
Divide cost of goods sold by average inventory, where average inventory is (start + end) ÷ 2. With COGS of 600,000 and average inventory of 100,000, turnover is 6.
What are days sales of inventory?
It is how long stock takes to sell: days in the period ÷ turnover. 365 ÷ 6 = 60.8 days.
What is a good inventory turnover ratio?
It depends on the industry: grocers turn stock many times a year while furniture or machinery sellers turn it a few times. As a rule of thumb, this page flags under 4 a year as a possible overstock and over 12 as a stock-out risk.
How do I use a period shorter than a year?
Enter that period's COGS and its length in days. Turnover then covers that period only, and the guidance scales it to a year. COGS of 100,000 over 90 days on 50,000 of stock is turnover 2 and 45 days of stock.
What is the inventory turnover formula?
Inventory turnover = cost of goods sold ÷ average inventory, where average inventory is (opening + closing) ÷ 2. With COGS of 240,000 and average inventory of 60,000 the ratio is 4. In Excel use =COGS/AVERAGE(opening,closing).
What is a good inventory turnover ratio for retail?
It depends on what you sell. As a rule of thumb, general retail often falls between about 4 and 12 turns a year, grocery is much higher and furniture lower. Compare against your own past periods and close competitors rather than a single number.
Should I use sales or cost of goods sold?
Use COGS, because inventory is recorded at cost. Using sales includes your markup and overstates turnover. With sales of 360,000 against COGS of 240,000 and average inventory of 60,000, sales would show 6 instead of the true 4.