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.
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.
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
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 · United States · 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.