# Inventory turnover calculator

https://salesbond.app/tools/inventory-turnover-calculator/
Updated: 2026-11-06

# Inventory Turnover Ratio Calculator

Inventory turnover ratio is cost of goods sold divided by average inventory, where average inventory is beginning plus ending inventory divided by two. With 600,000 of cost of goods sold and inventory of 90,000 at the start and 110,000 at the end of the year, turnover is 6: stock sells in about 61 days.

Enter cost of goods sold for the period and your inventory at its start and end, in any currency. You get average inventory, the turnover ratio and days of inventory on hand. Add a target turnover to see the stock level it needs and the cash it would free.

## Inventory turnover formulas

| Figure | Formula |
| --- | --- |
| Average inventory | (beginning + ending) ÷ 2 |
| Inventory turnover ratio | cost of goods sold ÷ average inventory |
| Days of inventory on hand | days in period ÷ turnover |
| Inventory for a target turnover | cost of goods sold ÷ target |

## Example

A shop’s cost of goods sold for the year is 600,000.00. Inventory was 90,000.00 on January 1 and 110,000.00 on December 31, so average inventory is 100,000.00. Turnover is 600,000 ÷ 100,000 = 6 times a year, and stock sits for 365 ÷ 6 = 60.83 days. To reach 8 turns, average inventory must fall to 75,000.00, which frees 25,000.00 of cash and cuts the time on the shelf to 45.63 days.

## Turnover for a month or a quarter

Use cost of goods sold and inventory for the same period and pick its length. A quarter with 150,000 of cost and 50,000 of average inventory turns 3 times, or 30 days of stock; at that pace the year is about 12 turns. Seasonal businesses get a truer picture by averaging month-end inventory over the year.

## Frequently asked questions

### How do you calculate the inventory turnover ratio?

Divide the cost of goods sold for a period by the average inventory for the same period. Average inventory is the beginning plus the ending inventory, divided by two. With 600,000 of cost of goods sold and an average inventory of 100,000, inventory turns over 6 times a year.

### What is a good inventory turnover ratio?

It depends on what you sell. Grocery and fast fashion turn stock many times a year, while furniture, jewellery and spare parts turn slowly. Compare your ratio with your own past periods and with businesses like yours. A rising ratio usually means stock sells faster and ties up less cash.

### What are days of inventory on hand?

Also called days inventory outstanding or days’ sales in inventory, it is the number of days in the period divided by the turnover ratio. A turnover of 6 over a 365-day year means stock sits for about 61 days on average before it is sold.

### Should I use cost of goods sold or sales?

Use cost of goods sold. Inventory is recorded at cost, so dividing cost by cost compares like with like. Sales include your markup and give a higher ratio. Some industry reports use sales, so the calculator offers both; just compare ratios built the same way.

### What does a low inventory turnover mean?

Stock is selling slowly: you may be buying too much, carrying items that no longer sell, or pricing too high. Slow stock ties up cash and costs money to store and insure. A very high ratio can also be a warning sign if it comes with frequent stockouts and lost sales.

### How can I improve inventory turnover?

Order smaller amounts more often, base orders on recent sales, clear slow-moving items with bundles or discounts, and drop products that rarely sell. Setting a target turnover in the calculator shows the average inventory you would need and how much cash that would free.

Related tools: [gross profit calculator](https://salesbond.app/tools/gross-profit-calculator/), [contribution margin calculator](https://salesbond.app/tools/contribution-margin-calculator/), [margin calculator](https://salesbond.app/tools/margin-calculator/). More on sales and running a sales team on the [SalesBond blog](https://salesbond.app/blog/) and the [home page](https://salesbond.app/).

## Official sources

- [OpenStax, Principles of Accounting Vol. 1: Financial Accounting, 10.5](https://openstax.org/books/principles-financial-accounting/pages/10-5-examine-the-efficiency-of-inventory-management-using-financial-ratios) — inventory turnover ratio and number of days’ sales in inventory.
- [Corporate Finance Institute, Inventory Turnover](https://corporatefinanceinstitute.com/resources/accounting/inventory-turnover/) — turnover on cost of goods sold or on sales, and days inventory outstanding.

**Updated on Nov 6, 2026.** This calculator is for information only and is not tax, legal or payroll advice. Results come from the formulas above. Use inventory at cost from your balance sheet or stock count, and cost of goods sold for the same period.