Inventory Turnover Calculator

How it works

1. 1Enter your annual cost of goods sold (COGS) — the direct cost of products sold during the year.
2. 2Enter your average inventory value — typically the mean of your beginning and ending inventory balances.
3. 3The calculator divides COGS by average inventory to give your turnover ratio, then divides 365 by turnover for days on hand.

Use cases

• Retailers benchmarking stock efficiency against industry peers to identify slow-moving product lines.
• Finance teams monitoring working capital tied up in inventory before quarterly reporting.
• Operations managers setting reorder policies and safety stock levels based on turnover velocity.

Frequently asked questions

What is a good inventory turnover ratio?

It depends heavily on the industry. Grocery retailers often exceed 20×, while jewellery or furniture retailers may see 2–4×. The key is to compare against your own historical trend and direct competitors rather than a single universal benchmark.

How is inventory turnover calculated?

Inventory turnover = COGS ÷ average inventory. For example, COGS of $500,000 and average inventory of $100,000 gives 5× per year, meaning you sell and replace your entire stock five times annually. Days of inventory = 365 ÷ 5 = 73 days.

Is a higher inventory turnover always better?

Not necessarily. High turnover frees up cash and reduces holding costs, but if it is too high you risk stockouts and lost sales. Low turnover ties up capital and may signal slow-moving or obsolete stock. The optimal rate balances service levels with working capital efficiency.