Inventory Turnover Calculator

Calculate how efficiently you sell and replace inventory. Measure COGS divided by average inventory to optimize stock management.

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Quick Facts

High Turnover
8+ times/year
Strong sales, possible stockouts
Good Turnover
4-8 times/year
Healthy balance
Low Turnover
2-4 times/year
Slow-moving inventory
Very Low
<2 times/year
Potential dead stock

Inventory Turnover Analysis

Calculated
Turnover Ratio
0x
per year
Days Sales of Inventory
0
days to sell inventory
Average Inventory
$0
during period
Daily Inventory Sold
$0
average per day

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Your inventory efficiency analysis will appear here.

Key Takeaways

  • Inventory Turnover measures how many times you sell and replace inventory per period
  • Higher turnover generally indicates efficient inventory management
  • Days Sales of Inventory (DSI) shows how long inventory sits before selling
  • Industry benchmarks vary significantly - compare within your sector
  • Too high turnover can indicate stockouts and lost sales opportunities

Understanding Inventory Turnover

Inventory turnover is a ratio that measures how many times a company has sold and replaced its inventory during a given period. It's a key indicator of inventory management efficiency and product demand. A higher turnover ratio generally indicates strong sales and efficient inventory management, while a lower ratio may suggest overstocking or weak sales.

The Inventory Turnover Formula

Inventory Turnover = Cost of Goods Sold / Average Inventory
Where: Average Inventory = (Beginning Inventory + Ending Inventory) / 2

Days Sales of Inventory (DSI)

DSI measures how many days it takes to sell through inventory. This metric is particularly useful for understanding cash flow and inventory efficiency.

Days Sales of Inventory = Days in Period / Inventory Turnover Ratio

What COGS Includes

  • Direct materials cost - Raw materials used in production
  • Direct labor costs - Wages for production workers
  • Manufacturing overhead - Factory utilities, equipment depreciation
  • Freight-in costs - Shipping costs to receive inventory
  • Does NOT include - Selling, general, or administrative expenses

Interpreting Inventory Turnover

  • High Turnover (8+): Strong sales or insufficient inventory - could mean lost sales opportunities due to stockouts
  • Good Turnover (4-8): Healthy balance between sales velocity and inventory investment
  • Low Turnover (2-4): Slow-moving inventory, overstocking, or weak demand
  • Very Low (<2): Potential dead stock, obsolete inventory, or poor demand forecasting

Industry Benchmarks

Optimal turnover varies significantly by industry. Here are typical ranges:

Industry Typical Turnover Notes
Grocery Stores 12-15 times/year Perishable goods require high turnover
Auto Dealers 8-12 times/year High-value items with good demand
Wholesale Distribution 6-12 times/year Varies by product category
Retail Clothing 4-6 times/year Seasonal fluctuations
Furniture Stores 3-5 times/year Larger purchases, longer sales cycles

Improving Inventory Turnover

  • Implement demand forecasting - Use data analytics to predict sales patterns
  • Negotiate better supplier terms - Smaller, more frequent orders reduce carrying costs
  • Identify slow-moving items - Use ABC analysis to categorize inventory
  • Optimize pricing strategies - Adjust prices based on demand and inventory levels
  • Improve marketing - Promote slow sellers to increase turnover
  • Review reorder points - Balance stockout risk against carrying costs