The inventory turnover calculator measures how efficiently your business converts inventory into sales. Enter your cost of goods sold and average inventory to calculate turnover ratio, days of stock, and carrying costs.
(Beginning + Ending inventory) ÷ 2
Storage, insurance, obsolescence (typically 20-30%)
How to Calculate Inventory Turnover
The inventory turnover calculator reveals how efficiently your business manages stock. Low turnover ties up cash in slow-moving inventory; high turnover means fast sales but risk of stockouts.
The Formula
Inventory Turnover = Annual COGS ÷ Average Inventory. Use COGS (not revenue) because it matches the cost basis of inventory. Average Inventory = (Beginning Inventory + Ending Inventory) ÷ 2. Days of Inventory On Hand (DOH) = 365 ÷ Turnover Ratio.
The Carrying Cost Impact
Carrying costs of 25% mean every $100,000 of average inventory costs you $25,000/year in storage, insurance, and capital costs. Cutting your average inventory by $50,000 saves $12,500/year — pure savings that flow directly to profit. That's why inventory optimization is one of the highest-ROI operational improvements for product businesses.
FAQ
What is inventory turnover ratio?
Inventory turnover measures how many times you sell and replace inventory in a period. Formula: COGS ÷ Average Inventory. A ratio of 6 means you sell through your entire inventory 6 times per year, or roughly every 2 months.
What is a good inventory turnover ratio?
It varies by industry. Grocery: 15-25x. Apparel: 4-6x. Electronics: 6-10x. Furniture: 3-5x. Software/SaaS: not applicable. Higher is generally better (faster cash cycle), but too high means you risk stockouts.
What is Days of Inventory On Hand (DOH)?
DOH = 365 ÷ Inventory Turnover Ratio. It tells you how many days of supply you have in stock. 30 DOH means you have 30 days of sales in inventory. Lower is better for cash flow; higher provides buffer against supply chain disruptions.
What are inventory carrying costs?
Carrying costs are the total cost of holding inventory: storage, insurance, obsolescence risk, opportunity cost of capital. Typically 20-30% of inventory value per year. Reducing DOH from 60 to 30 days can free up significant working capital.
Is this calculator free?
Yes, completely free with no signup required.