Inventory Turnover
Calculator
Results
- Inventory turnover ratio
- 6
- Days inventory outstanding
- 60.833333
Results
| Inventory turnover ratio | 6 |
| Days inventory outstanding | 60.833333 |
formula-map diagram
- Inventory turnover ratio
- 6
- Days inventory outstanding
- 60.833333
Formula breakdown
Formula
Inventory turnover = COGS ÷ Average inventory= 6
Note
This is a simplified model. Results use standard textbook definitions and ignore taxes, seasonality, attribution lag, discounting and accounting policy differences. Use them as an estimate, not as accounting, tax or investment advice.
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See all →Frequently asked questions
How is inventory turnover calculated?+
Inventory turnover = cost of goods sold (COGS) / average inventory value. It measures how many times a business sells and replaces its entire inventory over a given period, typically a year.
Why is a higher inventory turnover generally considered better?+
A higher turnover means products are selling quickly relative to how much stock is held, which reduces storage costs, lowers the risk of obsolescence or spoilage, and frees up cash that would otherwise be tied up in unsold inventory. Extremely high turnover can also signal understocking and lost sales, though, so context matters.
What's a typical inventory turnover ratio for different industries?+
Grocery and perishable goods retailers often see turnover ratios above 10-15 times per year due to short shelf life, while furniture or luxury goods retailers might see ratios closer to 2-4 times per year given slower-moving, higher-value items. Always benchmark within your own industry.
How do you convert inventory turnover into days of inventory on hand?+
Days inventory outstanding = 365 / inventory turnover ratio. A turnover of 5 translates to about 73 days, meaning on average, inventory sits for about 73 days before being sold and replaced.
Why should average inventory be used instead of a single point-in-time value?+
Inventory levels fluctuate throughout the year due to seasonality and restocking cycles, so using a single snapshot (like year-end inventory) can badly distort the ratio; averaging beginning and ending inventory (or using multiple periods) gives a more representative figure.