Inventory Turnover Calculator

This calculator measures how quickly stock sells through. Enter a year's cost of goods sold and the inventory value at the start and end of that year, and it returns the turnover ratio, days inventory on hand (also called days inventory outstanding, DIO, or inventory days), average inventory and weekly COGS.

Retailers, wholesalers, manufacturers and ecommerce sellers use turnover to spot overstocking, judge buying decisions and estimate how much cash is sitting on shelves. Lenders and investors read it alongside the working capital calculator figures, and it is one of the three inputs to the cash conversion cycle.

Use inventory valued at cost, not retail price, so that it matches COGS. A two-point average works for steady businesses; if stock swings sharply through the year, average the month-end balances instead and enter that figure as both the beginning and ending value.

This is the standard accounting definition used in financial-statement analysis textbooks. Some retail sources divide sales by inventory instead of COGS; that inflates the ratio because sales include margin, so only compare figures calculated the same way.

For a period shorter than a year, either annualize COGS or replace 365 with the number of days in the period — for example, quarterly COGS with 91 days.

Turnover and days on hand describe the same thing from opposite directions. Days are often easier to act on because they line up with supplier lead times and reorder cycles.

• Low turnover can mean overbuying, obsolete or seasonal stock that missed its window, or a pricing problem. It ties up cash and raises storage, insurance and markdown costs.
• High turnover usually means lean, well-bought stock — but if it comes with frequent stockouts, lost sales may cost more than the cash saved. Check it alongside your safety stock levels.
• Compare like with like. Perishable goods turn far faster than jewelry, furniture or industrial parts, so benchmark against businesses selling similar products, and against your own trend over several years.
• Look by product line. A healthy overall ratio can hide a few fast sellers carrying a long tail of dead stock.

• Mixing inventory at retail value with COGS at cost, which understates turnover.
• Using only year-end inventory when stock was much higher mid-year — a seasonal business can look far leaner than it is.
• Comparing a sales-based turnover from one source with a COGS-based figure from another.
• Forgetting to annualize: a quarter's COGS divided by average inventory gives quarterly turns, roughly one-quarter of the annual figure.