Inventory Turnover Calculator

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:

1. Turnover ratio = 1,200,000 ÷ 100,000 = 12
2. Days inventory on hand = 365 ÷ 12 ≈ 30.4 days
3. Rating: excellent (> 10) — typical of fast-moving retail
4. 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.