Inventory Turnover Calculator

Calculate your inventory turnover ratio to measure how efficiently you manage and sell inventory.

Annual cost of goods sold from income statement

Inventory value at start of period

Inventory value at end of period

Inventory Turnover = COGS / Average Inventory\nAverage Inventory = (Beginning Inventory + Ending Inventory) / 2\nDays in Inventory = 365 / Inventory Turnover
COGS: $1,200,000\nBeginning Inventory: $150,000\nEnding Inventory: $250,000\n\nAverage Inventory = $200,000\nInventory Turnover = 6.0\nDays in Inventory = 61 days

What is inventory turnover ratio?

Inventory turnover ratio measures how many times a company sells and replaces its inventory during a period (usually a year). Formula: Inventory Turnover = COGS / Average Inventory, where Average Inventory = (Beginning Inventory + Ending Inventory) / 2. A ratio of 6 means you sold and replaced your entire inventory 6 times per year. Higher turnover indicates efficient inventory management and strong sales.

What is a good inventory turnover ratio?

Good inventory turnover varies by industry: Grocery/perishables: 15-20+, Restaurants: 10-15, Retail clothing: 4-6, Auto parts: 6-8, Furniture: 4-5, Electronics: 8-12, Manufacturing: 4-6. Higher is generally better (faster sales, less holding cost), but too high may indicate stockouts and lost sales. Compare to competitors and industry benchmarks. Balance efficiency with customer service.

What is days in inventory (DII)?

Days in Inventory (also called Days Sales of Inventory or DSI) measures the average number of days inventory sits before being sold. Formula: DII = 365 / Inventory Turnover. Example: Turnover of 12 = 365/12 = 30.4 days in inventory. Lower days is better (faster turnover). It shows how long capital is tied up in inventory. Use alongside turnover ratio for complete picture of inventory efficiency.

How can I improve inventory turnover?

Improve inventory turnover by: 1) Increase sales: Better marketing, promotions, expand channels. 2) Reduce inventory levels: Implement just-in-time (JIT), improve forecasting, reduce safety stock. 3) Eliminate slow-moving items: Discount or discontinue, focus on fast sellers. 4) Improve supply chain: Faster restocking, better supplier relationships. 5) Use inventory management software: Track real-time, automate reordering. Monitor turnover monthly and adjust purchasing.

What are the costs of low inventory turnover?

Low inventory turnover creates: 1) High holding costs: Storage, insurance, utilities (typically 20-30% of inventory value annually). 2) Obsolescence risk: Products become outdated or expire. 3) Tied-up capital: Cash locked in inventory can't be invested elsewhere. 4) Reduced cash flow: Money sits in unsold goods. 5) Storage constraints: Warehouse space wasted. Example: $200K average inventory at 25% holding cost = $50K annual waste.

Can inventory turnover be too high?

Yes, excessively high inventory turnover (20-30+ for most industries) may indicate: 1) Stockouts and lost sales, 2) Inability to meet customer demand, 3) Frequent ordering increasing shipping costs, 4) Lost volume discounts from smaller orders, 5) Customer dissatisfaction from backorders. Balance efficiency with service levels. Optimal turnover maximizes profit while maintaining adequate stock to meet demand reliably.