Work out inventory turnover and days of inventory from your cost of goods sold and your opening and closing stock value.

Your inventory figures

1. Period How long is the period?

2. Figures for that period

Cost of goods sold

Opening inventory value - optional

Closing inventory value

Use the same currency for all three figures, and value the stock at cost, the same way as the cost of goods sold, not at selling price. Cost of goods sold is the cost of the stock that left the warehouse as sales during the period. If you leave the opening value blank, the closing value is used as the average.

Result

Inventory turnover-Fill in the fields to see the result.

Planning figure. Turnover depends on the industry, the product and the time of year, so compare it with your own earlier periods and with similar businesses. An average of only two stock values can hide seasonal peaks. Confirm the result against your accounting records.

Printed from warehousecalc.com. Results are planning estimates; confirm them before you rely on them.

How inventory turnover is calculated

Inventory turnover = cost of goods sold ÷ average inventory. Average inventory = (opening inventory + closing inventory) ÷ 2. Days of inventory = days in the period ÷ turnover. Value the stock at cost, in the same currency as the cost of goods sold.

A higher turnover means stock is sold and replaced faster. What is a good figure depends on the product and the business, so compare it with your own earlier periods. An average of two stock values can hide seasonal peaks. This is a planning figure, not an accounting statement.

Worked example: inventory turnover for one year

A business has a cost of goods sold of 1,200,000 for the year. Stock was worth 250,000 at the start of the year and 350,000 at the end.

Average inventory: (250,000 + 350,000) ÷ 2 = 300,000.
Inventory turnover: 1,200,000 ÷ 300,000 = 4.00 times a year.
Days of inventory: 365 ÷ 4.00 = 91.3 days.

On average the stock was sold and replaced four times in the year, and the stock on hand covered about 91 days of sales.

Common questions about inventory turnover

Should I use sales or cost of goods sold?

Use cost of goods sold. Stock is valued at cost, so both figures are on the same basis. Sales include the profit margin, so dividing sales by stock at cost makes the turnover look higher than it is.

What is a good inventory turnover ratio?

There is no single good figure. Fast-moving goods turn much faster than spare parts or seasonal items. Compare your figure with your own earlier periods and with similar product groups, and read it together with your stock-outs.

What does days of inventory mean?

How long the average stock would last at the current rate of sales: days in the period divided by turnover. It is also called days inventory outstanding (DIO).

Can I calculate turnover for a month or a quarter?

Yes. Enter the cost of goods sold for that period, the stock value at its start and end, and the number of days in it. The turnover is then for that period, not for a year.

Related tools and guides. To set order sizes and buffer stock, use the EOQ Calculator and the Safety Stock Calculator. Turnover is only as reliable as the stock figures behind it: check them with the Stock Count Variance Calculator and the guide to stock record accuracy.

Inventory Turnover Calculator