Inventory turnover
How many times a year stock is sold and replaced, and how many days of inventory that leaves on the shelf.
Average inventory = (Opening inventory + Closing inventory) ÷ 2
Inventory turnover = Cost of goods sold ÷ Average inventory
Days inventory outstanding = 365 ÷ Inventory turnover
Turnover is the quickest way to see whether inventory is working or just sitting. A business that turns its stock six times a year holds about two months of cover; one that turns it twelve times holds one month and needs half the cash to do it.
Use cost of goods sold, not revenue. Inventory is carried at cost, so dividing sales at selling price by stock at cost inflates the result by your gross margin and makes comparisons with other companies meaningless.
Calculator
The fields start with a worked example. Replace them with your own figures; the results update as you type.
- Average inventory
- 800,000
- Inventory turnover
- 6.00 turns / yr
- Days inventory outstanding
- 60.8 days
How to read it
Higher is usually better, but only until service suffers. A turnover that climbs while fill rate falls means you are running out of the wrong items, not managing stock well. Read it together with fill rate.
Common mistakes
- Two balance-sheet snapshots can hide a seasonal peak. If you can, average monthly inventory values instead.
- A company-wide figure blends fast and slow movers. Calculate it per product family before drawing conclusions.
- Comparing with another industry tells you little: grocers turn stock in days, machinery dealers in months.
Last reviewed 14 September 2026.