Inventory
Inventory Turnover Calculator
Measure how many times you sell through your inventory in a year
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Inventory input
Turnover ratio
Days on hand
How does it work?
Inventory turnover answers the question 'how fast does my money cycle through inventory?' A turnover of 12 means the average dollar invested in stock comes back as a sale 12 times a year — cash that can be reinvested in new SKUs, marketing, or operations. Low turnover ties cash up in shelves; high turnover, if too high, risks stockouts.
The formula
Turnover ratio and days-on-hand are mirror metrics — pick whichever is easier to communicate:
Turnover ratio = COGS ÷ Average inventory | Days inventory on hand = 365 ÷ Turnover ratio
Worked example
Annual COGS 1,200,000 SAR, average inventory 100,000 SAR:
- Turnover ratio = 1,200,000 ÷ 100,000 = 12
- Days inventory on hand = 365 ÷ 12 ≈ 30.4 days
- Rating: excellent (> 10) — typical of fast-moving retail
- Interpretation: every dollar of inventory becomes a sale roughly every month
Practical tips
- Use cost of goods sold, not revenue — turnover is a cost-based metric, not a sales one.
- Average inventory ≈ (beginning + ending) ÷ 2 for an annual calc. For volatile months, average across all 12.
- Benchmark within your industry: groceries 15–25x, electronics 6–10x, furniture 3–5x.
- Low turnover SKUs are clearance candidates — calculate carrying cost (holding cost × days) and decide whether to mark down.
- Compute turnover per category, not just store-wide — averages hide the slow movers.
Frequently Asked Questions
Is high turnover always good?
Not always — too high signals you're under-stocked and risking stockouts. The sweet spot depends on the category (groceries 15x+, furniture 3x).
Should I use sales or COGS in the formula?
COGS. Sales include your margin and would inflate the ratio. COGS is what you paid for the goods sold, which matches your inventory at cost.
What's a good turnover for a Saudi retail store?
Grocery 15–25x, fashion 4–6x, electronics 6–10x, furniture 3–5x. Compare against published peer benchmarks for your sub-segment.
How do I improve a low turnover?
Discount slow movers, reduce reorder quantities for chronic underperformers, drop SKUs whose carrying cost exceeds margin contribution, and renegotiate supplier lead times so you can run leaner.
Can turnover be calculated monthly?
Yes — pass periodDays = 30 instead of 365. Annual is more common because seasonality smooths out.
Does turnover relate to EOQ and reorder point?
Yes. Optimizing EOQ usually raises turnover (smaller orders = less average stock). Reorder point doesn't directly change turnover but prevents the stockouts that distort it.
From the same drawer
Everything in Inventory- SKU GeneratorGenerate single or bulk SKU codes with 5 ready industry templates
- Reorder Point CalculatorKnow when to reorder before you run out, with a basic mode and an advanced Z-score mode
- Economic Order Quantity (EOQ) CalculatorFind the order size that minimizes total inventory cost (ordering + holding)
- Inventory Valuation Calculator (FIFO / LIFO / Average)Compare FIFO, LIFO, and Weighted Average on the same transactions, side by side
When you run the same sum every day
Invoicing every day? In Snad each invoice posts its entry and updates your stock automatically.
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- Accounting, inventory and ZATCA e-invoicing in the same software
- Tax and balances are computed from your own transactions, so no figure moves to a separate spreadsheet