Inventory Turnover Calculator
Find how many times a year you sell through your inventory: cost of goods sold divided by average inventory. Also gives days of inventory on hand.
Last updated: October 2026
Inventory Turnover Ratio
5 times/year
Formula below · 1 source (ifrs.org) · Updated Oct 2026
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About this calculator
Inventory turnover = cost of goods sold ÷ average inventory
Cost of goods sold (COGS) comes from the income statement for the period, usually a year. Average inventory is usually (beginning inventory + ending inventory) ÷ 2, both at cost from the balance sheet. If inventory swings with the seasons, average the month-end values instead. Use COGS rather than sales revenue: inventory is valued at cost, so dividing revenue by it inflates the ratio by your markup.
The result is how many times the inventory was sold and replaced during the period. Days inventory outstanding (DIO), shown in the chart under the result, turns it into time: DIO = 365 ÷ turnover. A turnover of 5 means stock sits about 73 days on average.
What counts as good depends on the business. Grocers and other sellers of perishables turn stock many times a year; furniture, jewelry or heavy equipment may turn only a few times. Compare yourself with businesses like yours and with your own trend. Rising turnover usually means less cash tied up in stock, but very high turnover with frequent stockouts can mean you hold too little. Falling turnover can signal slow-moving or obsolete items; an ABC analysis helps find them.
How to use
Enter the year's cost of goods sold and your average inventory value. The default, COGS of $500,000 and average inventory of $100,000, gives a turnover of 5, or 365 ÷ 5 = 73 days on hand. An apparel shop with COGS of $480,000, beginning inventory of $60,000 and ending inventory of $100,000 has average inventory of $80,000, so turnover is 480,000 ÷ 80,000 = 6 and DIO is about 61 days.
Frequently asked questions
How do I calculate average inventory?
Add beginning and ending inventory for the period and divide by 2. For a seasonal business, add the 12 month-end inventory values (or 13, including the opening balance) and divide by the count for a more accurate average.
Why use cost of goods sold instead of sales?
Inventory is recorded at cost, so the numerator should be at cost too. Using sales mixes selling prices with cost and overstates turnover; if you compare with published figures, check which version they use.
How can I improve inventory turnover?
Order smaller amounts more often, improve demand forecasts, clear slow-moving and obsolete items, shorten supplier lead times so less safety stock is needed, and review your product range with an ABC analysis. Watch service levels as you do so; cutting stock too far causes stockouts.
What does days inventory outstanding mean?
The average number of days an item sits in stock before it is sold: 365 ÷ turnover. Lower DIO frees up cash, but it needs to stay long enough to cover your supplier lead time and demand swings.
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