Inventory Turnover Calculator
Calculate how efficiently you sell through inventory and optimize cash flow management
Inventory Turnover Calculator
Calculate how efficiently you sell through inventory and optimize cash flow management
Generated: 2/22/2026, 12:32:38 AM | AskSMB.io
Total cost of products sold during period
Inventory value at start of period
Inventory value at end of period
Number of days in the period (typically 365 for annual)
Average inventory cannot be zero
Average Inventory
$0
Average inventory held during period
Inventory Turnover Ratio
0.00
How many times inventory was sold and replaced
Days Inventory on Hand (DOH)
0.00 days
Average number of days inventory is held
Performance Indicator
No inventory
Based on industry benchmarks
How the Inventory Turnover Calculator Works
What is inventory turnover?
Inventory turnover is a financial metric that measures how many times a company sells and replaces its inventory during a specific period (usually a year). It's calculated by dividing the Cost of Goods Sold (COGS) by the average inventory value. A higher ratio indicates inventory is moving quickly, while a lower ratio suggests inventory is sitting on shelves too long, tying up cash and increasing storage costs.
Why inventory turnover matters
Inventory turnover is critical for several business reasons:
- Cash flow management: Faster turnover means cash isn't tied up in unsold inventory
- Storage costs: Less inventory means lower warehousing and carrying costs
- Product freshness: High turnover ensures products don't become obsolete or expire
- Operational efficiency: Identifies overstocking or understocking issues
- Profitability: Better turnover typically correlates with higher profitability
High vs low turnover explained
Understanding what your turnover ratio means:
- High turnover (>8): Inventory moves quickly, cash flows well, but may risk stockouts and lost sales
- Moderate turnover (4-8): Balanced approach with adequate stock levels and reasonable cash conversion
- Low turnover (<4): Inventory sits too long, cash is tied up, higher risk of obsolescence and markdowns
- Context matters: Luxury goods naturally have lower turnover than groceries; compare to industry peers
Industry benchmark ranges
Typical inventory turnover ratios by industry:
- Grocery stores: 12-20 times per year (perishable goods)
- Restaurants: 15-30+ times per year (fresh food)
- Fashion retail: 4-6 times per year (seasonal collections)
- Electronics: 5-8 times per year (fast-moving tech)
- Auto parts: 4-8 times per year
- Furniture: 3-5 times per year (bulky, expensive items)
- Jewelry/Luxury: 1-3 times per year (high-value, low-volume)
- Manufacturing: 2-4 times per year (raw materials and WIP)
How to improve inventory turnover
Strategies to optimize your inventory turnover ratio:
- Improve demand forecasting: Use historical data and trends to predict demand more accurately
- Implement just-in-time (JIT): Order inventory closer to when you need it to reduce holding costs
- Clear slow-moving inventory: Run promotions or discounts to move stagnant stock
- Better supplier relationships: Negotiate shorter lead times and smaller minimum orders
- Product mix optimization: Focus on fast-moving, high-margin items
- Automate reordering: Use inventory management software to trigger automatic reorders
- ABC analysis: Categorize inventory and focus on high-value items (A-items)
- Improve marketing: Drive sales through better promotion and customer engagement
Example Scenario
Scenario: A retail business wants to evaluate inventory efficiency for the year.
COGS: $240,000
Beginning inventory: $40,000
Ending inventory: $60,000
Results:
• Average inventory: $50,000 [($40,000 + $60,000) ÷ 2]
• Inventory turnover: 4.8 times per year ($240,000 ÷ $50,000)
• Days inventory on hand: ~76 days (365 ÷ 4.8)
• Performance: 🟡 Moderate - Room for optimization
This business turns its inventory about once every 76 days. With a ratio of 4.8, there's potential to improve efficiency by reducing slow-moving inventory or accelerating sales through better marketing.
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