How is inventory turnover calculated?

Inventory turnover = cost of goods sold ÷ average inventory. It tells you how many times stock is sold and replaced over the period.

What are days inventory outstanding?

Days inventory outstanding ≈ 365 ÷ turnover. It estimates how many days, on average, stock sits before being sold.

What is a good inventory turnover ratio?

It varies by industry. Grocery and fast-fashion retailers often turn 8-15 times a year, while furniture or jewellery may turn 2-4 times. Compare against peers in your sector rather than a single universal benchmark.

Should I use sales or COGS in the formula?

Use cost of goods sold, not sales revenue. COGS and inventory are both valued at cost, so the ratio is consistent. Using sales revenue overstates turnover because it includes your profit margin.

How do I find average inventory?

The simplest method is (opening inventory + closing inventory) ÷ 2 for the period. For seasonal businesses, averaging monthly balances gives a more accurate figure.

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Inventory Turnover Calculator

Inventory turnover calculator

Inventory turnover measures how efficiently a business sells through its stock. It is a key metric for retailers, wholesalers and manufacturers because it reveals whether capital is tied up in slow-moving inventory or working hard. This calculator returns both the turnover ratio and days inventory outstanding.

How it works

The calculator uses two standard formulas:

Inventory turnover = cost of goods sold ÷ average inventory — how many times stock is sold and replaced over the period.
Days inventory outstanding (DIO) = 365 ÷ turnover — the average number of days a unit sits before it sells.

A higher turnover (and lower DIO) means stock moves quickly; a low ratio can signal overstocking, weak demand or obsolete goods.

Example

A shop with $500,000 annual COGS and $100,000 average inventory:

Turnover = 500,000 ÷ 100,000 = 5 times per year
DIO = 365 ÷ 5 = 73 days

So on average the shop sells through its entire inventory five times a year, with stock sitting about 73 days before sale.

All calculations run privately in your browser — nothing is uploaded.