Inventory Turnover Calculator
How many times your stock sells through, and how long it sits before it does.
How this was calculated
About the Inventory Turnover Calculator
Inventory turnover says how many times the stock you hold is sold and replaced in a period: the cost of goods sold divided by the average stock, both at cost. The reverse view, days of inventory, is how long the average item sits before it sells. Together they show how hard your stock works — and how much cash it ties up.
Enter the cost of goods sold for any period and your stock at cost: at the start and the end, a list of stock counts, or an average you already know. The calculator gives the turnover for the period and for a year, the days of inventory, the weeks of cover your current stock gives, the sell-through rate and, with your net sales, the GMROI — the gross margin each unit of currency in stock earns. Set a target turnover or number of days to see how much stock that means, and how much cash it would free. Everything is calculated in your browser.
How to use it
- Choose the period your figures cover — a year, a quarter, a month, or a number of days — and your currency.
- Enter the cost of goods sold (cost of sales) for that period.
- Enter your stock at cost: at the start and the end of the period, a list of stock counts (month-end counts give a truer average), or the average if you know it.
- Optionally add net sales for the gross margin and GMROI, units for sell-through in units, and a target turnover or number of days.
- Read the results and the formula with your numbers; copy the summary or download the figures as CSV.
Examples
Average inventory 200,000 → turnover 6.0 a year Days of inventory 365 ÷ 6 = 60.8 Weeks of cover 220,000 ÷ (1,200,000 ÷ 365 × 7) = 9.6 Sell-through 1,200,000 ÷ 1,420,000 = 84.5% GMROI 600,000 ÷ 200,000 = 3.0
1.5 turns in the quarter = 6.0 a year Days of inventory 91.25 ÷ 1.5 = 60.8
Days of inventory come out the same either way: the quarter’s days are divided by the quarter’s turnover.
Average inventory 1,200,000 ÷ 8 = 150,000 50,000 less stock on average: 50,000 of cash freed
Common uses
- Track how fast stock moves from one month or quarter to the next.
- Find out how much cash an inventory reduction would free for the business.
- Compare product groups by turnover, cover and GMROI before a buying decision.
- Prepare the inventory figures for a lender, an investor or a review of the business.
The formulas
- Inventory turnover = cost of goods sold ÷ average inventory.
- Average inventory = (stock at the start + stock at the end) ÷ 2, or the average of several counts.
- Turnover a year = turnover for the period × 365 ÷ days in the period.
- Days of inventory = days in the period ÷ turnover = average inventory ÷ cost of goods sold a day.
- Weeks of cover = stock at the end ÷ cost of goods sold a week.
- Sell-through = what was sold ÷ what was available to sell: at cost, cost of goods sold ÷ (cost of goods sold + stock at the end); in units, units sold ÷ (units at the start + units received).
- GMROI = gross margin ÷ average inventory at cost, where gross margin = net sales − cost of goods sold.
Turnover and days of inventory are the activity ratios of the CFA Institute’s Financial Analysis Techniques reading (“inventory turnover” and “days of inventory on hand”); days of inventory is also called DIO or DSI.
Cost of goods sold, not sales
Stock is carried at cost, so divide the cost of what you sold by it. Dividing sales by stock at cost mixes two bases and inflates turnover by your markup: at a 50% markup it reads 9 instead of 6. Retailers who value stock at selling prices can work in retail values throughout — sales ÷ average stock at retail — as long as both figures are on the same basis.
If you buy and sell the same goods all year, the cost of goods sold is the opening stock plus purchases minus the closing stock.
Weeks of cover, sell-through and GMROI
- Weeks of cover looks forward: how long the stock you have now lasts at the rate it has been selling. Turnover and days of inventory look back over the period’s average.
- Sell-through is the share of what you had available that sold. Fashion and seasonal retailers watch it through a season to decide markdowns.
- GMROI joins margin and turnover: a GMROI of 3 means each unit of currency held in stock at cost earned 3 of gross margin in the period. It equals the gross margin ÷ cost of goods sold × turnover, so a product with a thin margin needs a fast turnover to earn the same GMROI as a slow product with a high margin.
Reading the result
A higher turnover means less cash tied up in stock and fresher goods, but too little stock means more stock-outs and smaller, costlier orders. A lower turnover means slow-moving or excess stock, which costs storage and capital and risks damage and obsolescence. There is no one good number: a grocer turns stock far more often than a jeweller. Compare yourself with your own past periods and with businesses that sell similar goods, and work out turnover for each product group — one overall figure can hide slow movers behind a few fast ones.
To set order quantities and reorder levels, use the EOQ calculator and the reorder point calculator.
Limitations
- An average of the start and end counts misses the peaks in between; seasonal stock needs monthly or weekly counts for a fair average.
- Stock and cost of goods sold must be on the same basis (at cost) and for the same goods; write-downs, shrinkage and returns to suppliers move the figures.
- Sell-through at cost assumes that what was available equals what sold plus what is left, with nothing written off.
- A year is 365 days; a quarter 91.25 and a month 30.42 days.
Privacy
Everything happens in your browser. What you enter or open here is not uploaded or stored by MySmartCoPilot.
Frequently asked questions
What is a good inventory turnover ratio?
It depends on what you sell. Perishable and everyday goods turn many times a year; furniture, machinery and jewellery turn slowly. Compare with your own past figures and with similar businesses, and look for a steady or rising turnover without more stock-outs.
How do I calculate days of inventory?
Divide the days in the period by the inventory turnover, or the average inventory by the cost of goods sold per day. With a turnover of 6 a year, days of inventory are 365 ÷ 6 = 60.8: the average item waits about two months before it sells.
Should I use sales or cost of goods sold?
Cost of goods sold, because stock is valued at cost. Sales include your markup, so sales ÷ stock at cost overstates turnover. Use sales only when the stock is also valued at selling prices.
What is GMROI?
Gross margin return on inventory investment: gross margin ÷ average inventory at cost. A GMROI of 3 means every 1 of stock at cost earned 3 of gross margin in the period. Below 1, the period’s gross margin is less than the money tied up in the stock.
What is the difference between turnover and sell-through?
Turnover compares a period’s sales at cost with the average stock, so it can be above 1 when stock is bought again during the period. Sell-through is the share of the stock available that actually sold, from 0 to 100%; it does not count how often the stock was replaced.