Inventory turnover calculator
Calculate how many times you sold through your average inventory in a period, and how many days of stock that represents. Use it to spot slow-moving stock and to compare periods, categories or warehouses.
Calculate inventory turnover
Value inventory at cost, in the same currency as cost of goods sold.
- Inventory turnover (times)
- 6.00
- Days inventory outstanding
- 60.8
- Average inventory value
- 200,000
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The formula
Inventory turnover = cost of goods sold ÷ ((beginning inventory + ending inventory) ÷ 2); days inventory outstanding = days in period ÷ turnover
- Cost of goods sold
- The cost value of stock sold in the period, from your income statement or accounting system. Use cost, not revenue, so both sides of the ratio are valued the same way.
- Beginning inventory value
- Inventory at cost on the first day of the period, from your balance sheet or a valued stock report.
- Ending inventory value
- Inventory at cost on the last day of the period, valued with the same costing method as the beginning figure.
- Days in period
- 365 for a year, 90 or 91 for a quarter, or the exact number of days covered by your cost of goods sold figure.
Worked example
A cosmetics distributor reports cost of goods sold of $1,200,000 for the year. Inventory at cost was $180,000 on January 1 and $220,000 on December 31. Average inventory is (180,000 + 220,000) ÷ 2 = $200,000. Turnover is 1,200,000 ÷ 200,000 = 6 times a year. Days inventory outstanding is 365 ÷ 6 ≈ 60.8 days, so stock sits for about two months on average before it sells.
How to read your turnover result
Higher turnover means less cash tied up per unit of sales and less stock at risk of expiring or going out of style. It is not automatically better. Turnover can rise because you are running out of stock, so read it next to order fill rate.
There is no universal good number. Compare against your own history and against similar categories in your business. A falling ratio for a category is the signal to look closer.
Calculate turnover by SKU and category
A company-wide ratio hides dead stock behind fast movers. Run the same calculation per category, then per SKU, and sort by days inventory outstanding. The long tail of slow SKUs is usually where cash and shelf space are trapped.
If cost data is hard to get at SKU level, use units: units shipped ÷ average units on hand. It answers the same question for operations and needs only warehouse data.
Common turnover calculation mistakes
- Dividing revenue by inventory at cost, which inflates turnover by your markup.
- Averaging only the first and last day when stock is seasonal. Use monthly values instead.
- Mixing periods, such as quarterly cost of goods sold with 365 days.
- Including stock you do not own, such as consignment or 3PL client stock, in your own inventory value.
Where accurate inventory numbers come from
Turnover inherits every error in your stock figures. If recorded balances drift from what is on the shelves, the ratio drifts with them. Cycle counting keeps the two aligned without a full shutdown.
In NextStock, every quantity change is a movement with a reason, and balances always equal the inventory ledger. Stock can be exported as CSV for your own analysis. KPI reports cover fill rate and count accuracy; see the warehouse KPIs guide for the metrics to track alongside turnover.
Frequently asked questions
Short, direct answers to the questions warehouse teams ask most.
What is a good inventory turnover ratio?
It depends on what you sell. Perishable food turns far faster than industrial spare parts, and a distributor holding broad range for next-day delivery turns slower than a brand with a few hero SKUs. Compare against your own trend and similar categories, and investigate SKUs whose days of stock exceed their shelf life or selling season.
How can I increase inventory turnover?
Order smaller quantities more often, clear or return dead stock, and cut the range where SKUs rarely sell. Shorter and more reliable supplier lead times let you hold less safety stock. Watch fill rate as you go, because turnover gained by running out of stock costs you sales.
What is the difference between turnover and days inventory outstanding?
They express the same thing two ways. Turnover counts how many times average inventory sold through in the period. Days inventory outstanding divides the days in the period by turnover, giving the average number of days stock sits before it sells. Days are often easier to explain to a team.
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