Inventory Turnover Calculator

Cost of goods sold in the period

Average inventory

Days in the period

Result

Turns in the period6
Days of stock60.8
That in weeks8.7
Cost used a day$65,753.42
Capital tied up$4,000,000.00
What mattersTurnover only means anything within an industry: a grocer turns stock dozens of times a year and a furniture shop a handful, and both are normal.

Turns, and the days behind them

Calculates how many times inventory turns over in a period and how many days stock sits on the shelf.

Turnover is the cost of goods sold divided by the average inventory: how many times the warehouse empties and refills over the period. It is a ratio, so on its own it says very little.

Days of stock is the same fact in a unit people can act on. Sixty days means everything on the shelf will still be there in two months, and that is a sentence a buyer can do something about.

What this calculator shows

Turns over the period and days of stock
The cost consumed per day
The capital tied up in inventory

What to keep in mind

Turnover uses the cost of goods, not revenue. Using revenue inflates the ratio by the whole margin.
Average inventory is the average over the period, not the closing balance. A single year-end figure taken after a sale understates the stock badly.

FAQs

What is a good turnover ratio?

There is no universal figure. Groceries turn dozens of times a year, electronics six to twelve, furniture two to four, and all of those are healthy in their own trade.

Cost or revenue in the numerator?

Cost. Inventory is carried at cost, so dividing revenue by it mixes two different bases and flatters the result.

Is faster always better?

Up to a point. Very high turnover often means stockouts, and every stockout is a sale that walked out to a competitor.

Why does turnover matter for cash?

Because stock is money on a shelf. Cutting days of stock from sixty to forty releases a third of the inventory as cash without selling anything more.

Worked example

A year of trading

Input: 24,000,000 cost of goods, 4,000,000 average inventory, 365 days

Output: 6 turns, 61 days of stock

Note: Six turns is unremarkable for general goods, poor for groceries and excellent for furniture. The figure only means something against the same industry.

Useful links

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Inventory Turnover Calculator

Result

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