INVENTORY TURNOVER

Inventory Turnover Calculator

Use cost of goods sold with beginning and ending inventory to estimate turnover and days in inventory over an observation period.

What inventory turnover measures

Inventory turnover estimates how many times stock was sold and replaced in the observation window. Read it with category, season, and stockout risk. A higher ratio is not automatically better.

Average inventory = (beginning inventory + ending inventory) ÷ 2
Inventory turnover = cost of goods sold ÷ average inventory
Days in inventory = average inventory ÷ cost of goods sold × observation days

Example

$120,000 of cost of goods sold, $18,000 beginning inventory, and $22,000 ending inventory is $20,000 of average inventory. Over 365 days that is 6 turns, or about 60.83 days in inventory.

Use cost, not selling price

Inventory is carried at cost, so cost of goods sold keeps the numerator and denominator on the same basis. Pasting revenue into the cost field inflates the ratio by the markup.

Frequently asked questions

Is a higher turnover always better?

No. Fast turns can mean efficient stock, or they can mean stockouts, rush orders, and supply risk.

What if beginning and ending inventory are both zero?

Average inventory is zero, so turnover is not applicable.

Does this work for seasonal products?

Only as a first pass. A two-point average can miss a mid-period peak. A more frequent average inventory series is better.

Should inventory be entered at retail price?

No. Use the same cost basis as cost of goods sold.

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