📦 Inventory Turnover Calculator
Calculate inventory efficiency
(Beginning Inventory + Ending Inventory) / 2
How to Use This Calculator
Enter Cost of Goods Sold
Input the annual cost of goods sold (COGS) - the direct costs of producing goods sold during the period.
Enter Average Inventory
Enter the average inventory value - typically (Beginning Inventory + Ending Inventory) / 2.
Review Inventory Turnover
See the inventory turnover ratio - measures how many times inventory is sold and replaced during the period. Higher turnover indicates better inventory management.
Formula
Inventory Turnover = Cost of Goods Sold / Average Inventory
Days in Inventory = 365 / Inventory Turnover
Example Calculation:
If COGS $1,000,000, average inventory $200,000:
• Inventory turnover = $1,000,000 / $200,000 = 5.0x
• Days in inventory = 365 / 5.0 = 73 days
• This means inventory is sold and replaced 5 times per year
About Inventory Turnover Calculator
An inventory turnover calculator helps you calculate how many times a company sells and replaces its inventory during a period. Inventory Turnover = Cost of Goods Sold / Average Inventory. Higher turnover ratios indicate better inventory management - the company is selling inventory quickly and efficiently. Inventory turnover is a key indicator of inventory management efficiency and product demand. It helps assess how well inventory is being managed and whether inventory levels are appropriate.
When to Use This Calculator
- Inventory Management: Assess inventory turnover efficiency
- Performance Analysis: Evaluate inventory management performance
- Financial Analysis: Analyze inventory efficiency
- Business Planning: Plan for optimal inventory levels
Understanding Inventory Turnover
- Higher Turnover: Faster inventory sales (generally better)
- Lower Turnover: Slower inventory sales (may indicate issues)
- Industry Standards: Turnover ratios vary by industry
- Days in Inventory: Average number of days inventory sits unsold
Why Use Our Calculator?
- ✅ Inventory Management: Calculate inventory turnover accurately
- ✅ Performance Analysis: Evaluate inventory efficiency
- ✅ Financial Analysis: Analyze inventory management
- ✅ Business Planning: Plan for optimal inventory levels
- ✅ 100% Free: No registration or payment required
Frequently Asked Questions
What is inventory turnover?
Inventory turnover measures how many times a company sells and replaces its inventory during a period. It's calculated as Cost of Goods Sold / Average Inventory. Higher turnover ratios indicate better inventory management - the company is selling inventory quickly and efficiently. Inventory turnover is a key indicator of inventory management efficiency and product demand. It helps assess how well inventory is being managed and whether inventory levels are appropriate.
What's a good inventory turnover ratio?
A good inventory turnover ratio depends on the industry and business model. Generally, higher turnover is better, but the "good" ratio varies by industry: Grocery stores (10-20x), Fashion retail (4-6x), Furniture (3-5x), Luxury goods (1-3x). Compare to industry benchmarks and historical trends. Higher turnover indicates faster inventory sales and better inventory management, while lower turnover may indicate slow-moving inventory or overstocking.
How do I improve inventory turnover?
To improve inventory turnover: (1) Better demand forecasting - improve demand forecasting to reduce overstocking, (2) Reduce slow-moving inventory - identify and reduce obsolete or slow-moving inventory, (3) Improve sales velocity - improve marketing and sales to increase demand, (4) Just-in-time inventory - implement just-in-time inventory management, (5) Supplier management - improve supply chain efficiency, (6) Promotions - run promotions for old stock. The goal is to sell inventory faster while maintaining appropriate inventory levels.
Why is inventory turnover important?
Inventory turnover is important because it measures inventory management efficiency and cash flow. It helps: (1) Assess efficiency - understand how efficiently inventory is managed, (2) Cash flow - faster turnover improves cash flow by reducing capital tied up in inventory, (3) Inventory management - identify inventory management issues, (4) Performance comparison - compare inventory efficiency across periods or companies. Higher turnover improves cash flow, reduces working capital needs, and indicates better inventory management.