Inventory Turnover Calculator

Inventory Turnover Ratio measures how many times a company sells and replaces its entire inventory within a given period. It is one of the most critical efficiency metrics in retail, manufacturing, and wholesale operations.

Primary formula: Inventory Turnover = Cost of Goods Sold (COGS) ÷ Average Inventory

Average Inventory = (Beginning Inventory + Ending Inventory) ÷ 2

Alternative formula (less preferred — uses revenue, not cost): Inventory Turnover = Net Sales ÷ Average Inventory

The COGS-based version is more accurate because it compares inventory at cost to the cost of what was sold — no markup distortion.

Days Inventory Outstanding (DIO): DIO = 365 ÷ Inventory Turnover

DIO shows how many days of inventory are on hand on average. Lower DIO = faster-moving stock.

What each variable means:

• COGS = total cost of products sold during the period (from the income statement)
• Beginning Inventory = inventory value at the start of the period
• Ending Inventory = inventory value at the end of the period

Industry benchmarks:

Worked example: COGS = $2,400,000. Beginning inventory = $300,000. Ending inventory = $500,000. Average inventory = ($300,000 + $500,000) / 2 = $400,000 Turnover = $2,400,000 / $400,000 = 6.0× DIO = 365 / 6.0 = ~61 days

A turnover below the industry benchmark suggests overstocking, obsolescence risk, or slow sales. A turnover too high may mean stockouts and lost sales.