Inventory Turnover Ratio: How to Measure and Improve Inventory Efficiency

Published: January 2026 | Category: Business | Reading Time: 11 minutes

Inventory is often a company's largest asset—and its biggest source of cash flow problems. Too much inventory ties up capital and increases storage costs. Too little means lost sales. The inventory turnover ratio is your key metric for finding the right balance.

What Is Inventory Turnover?

Inventory turnover measures how many times a company sells and replaces its inventory during a period. It indicates how efficiently you are converting inventory into sales.

The Inventory Turnover Formula

Inventory Turnover = Cost of Goods Sold / Average Inventory

Example: $1,000,000 COGS / $200,000 average inventory = 5x turnover

Calculate Your Inventory Turnover

Measure and analyze your inventory efficiency.

Try the Inventory Turnover Calculator

Days Inventory Outstanding (DIO)

A related metric that converts turnover into days:

Days Inventory = 365 / Inventory Turnover

If turnover = 5x, then DIO = 365/5 = 73 days.

Industry Benchmarks

Grocery/Supermarket: 12-20x turnover
Fast Fashion Retail: 8-12x
Electronics: 6-10x
Manufacturing: 4-8x
Furniture: 3-5x

Strategies to Improve Inventory Turnover

Improve demand forecasting
Implement ABC analysis
Reduce lead times
Identify and eliminate dead stock
Optimize reorder points
Just-in-time ordering

Analyze Your Inventory Efficiency

Calculate turnover and identify improvement opportunities.

Use the Inventory Calculator

Conclusion

Inventory turnover is a critical metric that reveals how efficiently your business converts inventory into revenue. Use our Inventory Turnover Calculator to measure your current performance and identify improvement opportunities.