Inventory Turnover Calculator
Calculate inventory turnover from COGS and average inventory, plus days inventory outstanding — how many days of stock you hold.
How it works
Inventory turnover = COGS ÷ average inventory · Days inventory outstanding = 365 ÷ turnover
Inventory turnover counts how many times a business sells and replaces its stock over a year — cost of goods sold divided by the average inventory carried. A higher ratio means stock moves quickly, tying up less cash and reducing the risk of obsolescence; a low ratio warns of overstocking or slow sales. Dividing 365 by the turnover converts it to days inventory outstanding: the average number of days a unit sits on the shelf before it sells. Use average inventory (beginning plus ending, divided by two) so a single snapshot does not distort the ratio.
Worked example
A retailer with $500,000 in COGS and $100,000 of average inventory turns over 500,000 ÷ 100,000 = 5 times a year. That is 365 ÷ 5 = 73 days of inventory on hand — on average, stock sells within about two and a half months.
Frequently asked questions
What is a good inventory turnover ratio?
It varies sharply by industry: grocery and fresh food can exceed 15× a year, while furniture or jewelry may turn only 2–4×. Compare against typical figures for your specific sector rather than a universal target, and watch the trend over time.
Should I use COGS or sales in the numerator?
Use cost of goods sold, not sales revenue. Inventory is carried on the books at cost, so dividing COGS by average inventory compares like with like. Using sales overstates turnover because sales include the profit margin that inventory does not.
What does days inventory outstanding tell me?
It converts the turnover ratio into an intuitive number of days — how long, on average, an item stays in stock before it sells. Lower days generally mean leaner, more efficient inventory, but too low can risk stockouts and lost sales.
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Educational estimate, not financial advice.