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Businessoperations

Inventory Turnover Calculator

Inventory turnover and days of stock. It uses cost of goods rather than revenue, because inventory is carried at cost and dividing revenue by it mixes two different bases.

Also called: stock turn calculator, days inventory outstanding.

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Inventory turnover
6

Inventory turns 6 times a year, which is 60.8 days of stock on hand. Between four and twelve turns is normal for most retail and manufacturing.

Days of inventory
60.8
Average inventory
₹40,00,000
Daily cost of goods
₹65,753
On the number
Between four and twelve turns is normal for most retail and manufacturing.
How this is calculated
Method and background

How this is calculated

Turnover is annual cost of goods sold over average inventory. Using revenue instead is a common error that inflates the ratio by the gross margin, since inventory sits on the balance sheet at cost. Averaging the opening and closing balances smooths a year-end stock build. The days figure is the same fact stated usefully: how long stock sits before it sells.

cost of goods against average inventory, not revenue against inventory
T
Turnover ratio

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

a manufacturer

Cost of goods sold for the year
₹2,40,00,000
Opening inventory
₹36,00,000
Closing inventory
₹44,00,000

Inventory turnover6

2.4 crore over 40 lakh average

Open this example

no closing stock doubles turnover

Cost of goods sold for the year
₹2,40,00,000
Opening inventory
₹40,00,000
Closing inventory
₹0

Inventory turnover12

boundary

Open this example

Method and limits

What it assumes

  • A simple two-point average, which a seasonal business should replace with monthly balances.

What it deliberately does not model

  • A high ratio can mean efficiency or it can mean stockouts and lost sales.
  • Seasonal businesses need monthly averaging for the number to mean anything.

Formula version 1.0.0 · definition 1.0.0 · India · Report a problem with this calculator

Frequently asked questions

Why not use sales instead of cost of goods?
Because inventory is valued at cost. Dividing sales by inventory mixes a figure that includes margin by one that does not, and overstates turnover by exactly the gross margin.