Inventory Turnover Calculator
Calculate inventory turnover ratio and days inventory outstanding from cost of goods sold and average inventory value.
$
$
(Beginning inventory + Ending inventory) ÷ 2
Inventory Turnover Ratio
5.00x
Days Inventory Outstanding
73 days
How Inventory Turnover Is Calculated
Inventory turnover measures how many times a business sells and replaces its inventory over a given period. Enter your cost of goods sold (COGS) for the period and your average inventory value over that same period to calculate the ratio.
Average inventory is typically calculated as (beginning inventory + ending inventory) ÷ 2 for the period. The calculator also shows Days Inventory Outstanding (365 ÷ Turnover), which estimates how many days, on average, inventory sits before it's sold.
What Counts as a "Good" Turnover Ratio?
There's no single universal benchmark — a "good" inventory turnover ratio varies widely by industry. Grocery stores and other businesses selling perishable goods often turn over inventory 10-15+ times a year, while industries with expensive, slow-moving goods — like jewelry, heavy machinery, or automobiles — may turn over inventory just 2-4 times a year and still be perfectly healthy. Compare your ratio to others in your specific industry rather than to a generic number.
Example
A retailer with $500,000 in annual COGS and $100,000 in average inventory has a turnover ratio of 500,000 ÷ 100,000 = 5 — meaning inventory is fully sold and replaced about 5 times a year, or roughly every 73 days (365 ÷ 5).
Common Use Cases
- Assessing how efficiently a business manages its inventory and cash tied up in stock.
- Comparing turnover across periods to spot slowing sales or overstocking.
- Benchmarking against competitors within the same industry.
- Supporting purchasing and reorder decisions.
FAQs
What does a low turnover ratio mean?
A low ratio can indicate overstocking, weak sales, or obsolete inventory tying up cash that could be used elsewhere. However, some industries (like capital equipment) normally run low ratios, so context matters.
What does a very high turnover ratio mean?
A very high ratio can mean strong sales and efficient inventory management, but an unusually high ratio can also signal insufficient stock levels, leading to missed sales from stockouts.
Should I use annual or a different period for COGS?
You can use any period (monthly, quarterly, or annual) as long as the COGS figure and the average inventory figure cover the same timeframe — mixing periods will distort the ratio.