Inventory turnover is a key efficiency metric for any business that sells physical products. It measures how many times your inventory is sold and replaced over a period. A higher turnover means efficient inventory management; too high may indicate lost sales from stock-outs. Calculate your turnover ratio and days of inventory on hand to benchmark your operations.
Inventory Turnover Ratio:
Days of Inventory:
How to Use This Tool
Enter the cost of your inventory at the start of the period.
Enter the cost of your inventory at the end of the period.
Enter the total cost of goods sold during the period.
Click Calculate to see your turnover ratio and average days of inventory.
The Formula
Inventory Turnover = COGS / Average Inventory where Average Inventory = (Beginning + Ending Inventory) / 2. Days of Inventory = 365 / Turnover Ratio. A turnover of 8x means you sold and replaced inventory 8 times per year. A turnover below 4x may signal overstocking.
Why It Matters
Your retail store had $500,000 in sales with $100,000 average inventory. Your 5x turnover means stock refreshes every 73 days. A benchmark of 6-8x suggests you could free up $30,000 in tied-up capital.