Free tool
Inventory turnover ratio calculator
Enter cost of goods sold and average inventory at cost to see how many times stock turned over and how long each turn took.
Your cost of goods and inventory
Inventory turnover
4 turns
- Days per turn
- 91.25 days
Cost of goods sold divided by average inventory, both at cost, over the same period.
The formula
Inventory turnover ratio = cost of goods sold ÷ average inventory
Days per turn = days in the period ÷ inventory turnover ratio
- Cost of goods sold
- The cost of the stock that sold during the period, not its sales value.
- Average inventory
- Stock value at cost averaged over the same period: (beginning + ending) ÷ 2 at its simplest.
- Days in the period
- 365 for a year, 90 for a quarter, matched to the cost of goods sold figure.
Worked example
- Cost of goods sold for the year is $1,200,000 and average inventory at cost is $300,000.
- Divide one by the other: $1,200,000 ÷ $300,000 = 4 turns.
- Over 365 days, one turn takes 365 ÷ 4 = 91.25 days.
When it applies
- Comparing how fast stock sells through across years, quarters, categories or locations measured the same way.
- Checking whether stock is growing faster than the cost of goods it supports.
When it breaks down
- A business with sharp seasonal peaks needs monthly balances in the average; two year-end counts miss the peak.
- One ratio for the whole business hides fast and slow items behind each other; work it out by category or SKU before acting on it.
Common mistakes
Dividing sales by inventory
Sales are at selling price and inventory is at cost, so the ratio comes out too high. Use cost of goods sold.
Using ending inventory alone
A year-end count can sit far from the level held most of the year. Average across the period instead.
Mixing periods
Twelve months of cost of goods sold over one quarter's average inventory gives a ratio that describes neither.
Chasing turns at any cost
Turns rise when stock is cut, and so do stockouts. Read turnover next to service level and lost sales.
Questions
What is the inventory turnover formula?
Inventory turnover ratio = cost of goods sold ÷ average inventory, both at cost and over the same period.
What is a good inventory turnover ratio?
There is no single benchmark. Grocery and fresh goods turn far faster than furniture or spare parts, so compare against your own history and similar categories.
How do I convert turnover into days?
Divide the days in the period by the ratio. Four turns in 365 days is 91.25 days per turn, the same figure as days inventory outstanding.
Is a higher inventory turnover always better?
Not on its own. Higher turnover frees cash, but if it comes from running too lean it shows up as stockouts and lost sales.
Should I use cost of goods sold or sales?
Cost of goods sold. Inventory is carried at cost, so the numerator has to be at cost too.
How does turnover connect to reordering?
Turnover is a look back at the whole period. Skuvelo works forward per item: it recommends a reorder quantity and timing with cash context, for a person to review before anything is bought.
Related
Published by Skuvelo. Results are estimates computed from the figures you enter, not a reading of your own sales or stock.
A calculator answers once. Skuvelo keeps answering.
This tool computes one number from what you type. Skuvelo computes it continuously, for every SKU, from your own sales and stock.