01
Inventory turnover formula
Divide cost of goods sold by average inventory. Average inventory is beginning inventory plus ending inventory divided by two.
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Inventory Turnover Calculator
Calculate inventory turnover and estimated days on hand from COGS and average inventory for a defined reporting period.
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01 USE IT NOW02 NO ACCOUNT03 FIELD NOTES BELOW
WORKING INPUTS
Build the scenario.
LIVE RESULT
Inventory turnover
4.00×91.3 estimated days on hand.AVERAGE INVENTORY$60,000.00
PERIOD365 days
DAYS ON HAND91.3
14
THE PACE OF WORKING CAPITAL
Measure how often the stockroom renews itself.
Turnover connects the cost of what sold with the average inventory investment that supported those sales.
WORKING VIEW
4.0×ANNUAL EXAMPLE
METHODCOGS ÷ average inventory
WORKING NOTE$240k COGS · $60k average inventory · 91.3 days on hand
INPUTS → CLEAR OUTPUT
THE FIELD NOTES
Quick answer above. Better decisions below.
Use the result now, then read the practical notes for assumptions, examples, limitations, and the choices behind it.
ANNUAL EXAMPLE4.0×
$240k COGS · $60k average inventory · 91.3 days on hand
02
Convert turnover into days on hand
Divide the days in the reporting period by turnover. Four annual turns correspond to about 91.3 days on hand.
03
Keep COGS and inventory on the same basis
Use values from the same entity, locations, category, currency, and period. Do not compare annual COGS with one month of inventory or retail-value inventory with cost-basis COGS.
04
Interpret inventory turns in context
Higher turnover can indicate efficient stock use, but it can also signal understocking. Lower turnover can mean excess or aging stock, but deliberate safety stock and seasonal builds may be rational.
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Inventory turnover formula
Divide cost of goods sold by average inventory. Average inventory is beginning inventory plus ending inventory divided by two.
If COGS is $240,000 and average inventory is $60,000, turnover is 4.0 times during the stated period.
Convert turnover into days on hand
Divide the days in the reporting period by turnover. Four annual turns correspond to about 91.3 days on hand.
The estimate describes an average. Individual SKUs can move far faster or slower than the blended portfolio.
Keep COGS and inventory on the same basis
Use values from the same entity, locations, category, currency, and period. Do not compare annual COGS with one month of inventory or retail-value inventory with cost-basis COGS.
A two-point average is simple but can hide large seasonal swings. Monthly or more frequent averages can better represent a volatile business.
Interpret inventory turns in context
Higher turnover can indicate efficient stock use, but it can also signal understocking. Lower turnover can mean excess or aging stock, but deliberate safety stock and seasonal builds may be rational.
Compare the result with service levels, stockouts, gross margin, lead times, and category benchmarks before changing purchasing policy.
Questions, answered.
What is inventory turnover?
Inventory turnover estimates how many times average inventory is sold or used during the selected reporting period.
Should inventory be measured at cost or retail?
Use inventory at cost when the numerator is cost of goods sold. Mixing cost and retail values makes the ratio inconsistent.
What is a good inventory turnover ratio?
There is no universal target. Healthy turnover depends on category, margin, seasonality, lead time, service goals, and stockout risk.
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