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Inventory turnover calculator: turns and days on hand
Enter your yearly cost of goods sold and your starting and ending inventory. You get turns per year and the number of days stock sits before it sells.
Inventory turnover is cost of goods sold divided by average inventory. At the default numbers stock turns 6.00 times a year, which is about 61 days of inventory.
Written by Procurement VMS Editorial Team · Reviewed by Michael, Procurement Advisor Expert · Updated
Your numbers
The boxes start with an example so you can see how it works. Replace them with your own figures.
Your result
Stock turns 6.00 times a year, so an item spends about 61 days on the shelf before it is used or sold. Compare the figure with your own history and with firms that sell the same kind of goods, not with a general average.
| Average inventory | USD 200,000 |
|---|---|
| Inventory turnover | 6.00 times a year |
| Days inventory outstanding | 61 days |
| Weeks of stock on hand | 8.7 weeks |
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How the inventory turnover calculator works
The formula
Inventory turnover = cost of goods sold / average inventory. Days inventory outstanding = 365 / turnover.
Turnover tells you how hard your stock is working. A low figure means cash is parked on shelves. A very high one can mean you run lean, or that you are short of stock and missing sales.
Use cost of goods sold on top and inventory at cost underneath, so both sides are valued the same way. Averaging the start and end of year smooths out one unusually high or low month. For a seasonal business, average twelve month-end figures instead.
The example numbers are illustrative and are not benchmarks. Use your own data for any decision.
How to use it with your own data
- Take cost of goods sold for the last 12 months from the income statement.
- Take inventory at cost at the start and end of the same period from the balance sheet.
- Compare turns and days on hand by product group, since a single average hides the slow lines.
Mistakes that skew the answer
Using sales instead of cost of goods sold
Sales include your margin and overstate turnover. Keep both the numerator and the inventory at cost.
Comparing across industries
A grocer turns stock many times a year and an equipment maker a few. Compare against your own past and your direct peers.
Chasing a high number
Pushing turnover up by cutting buffer stock can raise stock-outs. Read it alongside service level.
What to do with the result
If days on hand is rising, list the ten slowest items and set their order size with the EOQ calculator. Then price the stock you carry with the inventory carrying cost calculator, and track the trend in a procurement KPI dashboard.
Questions about the inventory turnover calculator
What is a good inventory turnover ratio?
It depends on the industry and the product. Perishable goods turn fast and capital equipment slowly. Judge your figure against your own history and direct peers.
How is days inventory outstanding different from turnover?
They describe the same thing two ways. Turnover is how many times stock cycles in a year, and days inventory outstanding is how long one cycle takes.
Should I use average or ending inventory?
Average. Ending inventory can sit at an unusual level on the last day of the year and distort the ratio.
Does turnover include raw materials?
It can. Many firms track raw materials, work in progress and finished goods separately, because each moves at its own pace.