Inventory Turnover Calculator

Inventory turnover answers one question: how many times does your money cycle through stock in a year? A turnover of 12 means every unit of currency tied up in inventory comes back as a sale twelve times a year — cash you can put back into new lines, marketing or operations. Low turnover freezes cash on the shelf; very high turnover risks stocking out.

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 cost of goods sold 1,200,000, average inventory 100,000:

1. Turnover ratio = 1,200,000 ÷ 100,000 = 12
2. Days of cover = 365 ÷ 12 ≈ 30.4 days
3. Interpretation: your stock covers one month of sales
4. The next question: is your lead time shorter than thirty days? If it is longer, a healthy-looking ratio is hiding a stockout risk

Practical tips

• Calculate turnover on cost of goods sold, not revenue: revenue carries your margin, which inflates the ratio and makes any comparison between two shops with different margins meaningless.
• There is no universal 'good' rate: groceries turn dozens of times a year and furniture a handful, so the honest comparison is against your sector and your own history.
• Importers turn over more slowly by structure, not by mismanagement: a long lead time forces larger stock, so compare yourself against another importer rather than a shop reordering locally every week.
• Calculate it per item or item group, not for the whole warehouse: the average hides a dead item behind a fast one, and that is where capital disappears most quietly.