Overview
Enter cost of goods sold (COGS), beginning inventory, and ending inventory to calculate inventory turnover: COGS ÷ average inventory, where average inventory is (beginning + ending) ÷ 2. This measures how many times inventory is sold and replaced over the period - a higher turnover generally indicates efficient inventory management and strong sales relative to stock held, while a low turnover can signal overstocking or weak sales. The tool also derives days inventory outstanding (365 ÷ turnover), the average number of days inventory sits before being sold. Average inventory cannot be zero, since it's the denominator. Runs entirely client-side, and this is an informational estimate, not financial advice.
Best for: Measuring how efficiently a business sells through and replaces its inventory
How to use this tool
- Enter COGS. Cost of goods sold for the period.
- Enter beginning and ending inventory. Inventory value at the start and end of the period, used to compute the average.
- Read turnover and days inventory. How many times inventory turned over, and the average days it sat before being sold.
Frequently asked questions
Averaging the beginning and ending inventory smooths out the effect of inventory levels that spike or dip at a single point in time, giving a more representative denominator for the period as a whole.
It converts the turnover ratio into a time measure: roughly how many days, on average, a unit of inventory sits before being sold. It's calculated as 365 divided by the turnover ratio.
Generally yes, up to a point - it suggests inventory isn't sitting idle. But extremely high turnover can also indicate a business is understocked and risking stockouts, so it's best read alongside sales trends and industry norms rather than in isolation.