Inventory Turnover Calculator

Inventory turnover calculator for COGS, average inventory, and days on hand

Inventory turnover is a simple performance metric that shows how quickly a business sells and replaces its inventory during a period. A higher turnover usually means inventory moves faster and cash is tied up for less time. A lower turnover can indicate slow-moving stock, overbuying, or demand problems. The right number depends on your industry, product type, and how stable your sales are, so the best use is to compare your turnover over time and against similar businesses.

This calculator uses the common accounting approach: inventory turnover equals cost of goods sold (COGS) divided by average inventory. If you enter beginning and ending inventory, the calculator estimates average inventory as the midpoint between those two values. This is a practical approximation when you do not have daily inventory records. It is also common in monthly, quarterly, and annual reporting.

In addition to the turnover ratio, the calculator shows “days of inventory on hand,” sometimes called days inventory outstanding. This converts the turnover ratio into a time-based measure: how many days, on average, inventory sits before it is sold. Many people find this easier to interpret than a ratio. You can change the number of days in your period to match how you report results, for example 30 days for a month, 90 for a quarter, 360 for some finance models, or 365 for a year.

To use the calculator, enter your COGS for the same period as your inventory values. Then enter the inventory balance at the start of the period and at the end of the period. If you are using financial statements, this is typically the inventory line on the balance sheet. Use the same units for all amounts, for example all in dollars or all in rands. If you are comparing results month to month, keep your approach consistent, including whether you use 30, 365, or actual days for each period.

The outputs work together. Average inventory is the base input used for the turnover calculation. Turnover tells you how many “times” inventory is sold and replenished across the period. Days on hand tells you how long stock sits. If turnover is high and days on hand is low, inventory is moving fast. If turnover is low and days on hand is high, inventory is moving slowly and you may have cash tied up in stock.

There are reasons a high turnover is not always good. If you are constantly out of stock, you can lose sales and damage customer trust. If you carry too little safety stock, supply delays can stop revenue. For some businesses, especially with long lead times or seasonal demand, a lower turnover may be normal. The value of this calculator is that it gives you a clear baseline and a repeatable way to track improvement.

Assumptions and how to use this calculator

• COGS, beginning inventory, and ending inventory must all refer to the same period and the same valuation method.
• Average inventory is estimated as (beginning inventory + ending inventory) ÷ 2, which is a midpoint approximation.
• If your average inventory is zero or extremely small, turnover becomes meaningless or unstable, so the calculator requires average inventory greater than zero.
• Days on hand is calculated as days in period ÷ turnover. If turnover is zero, days on hand cannot be calculated.
• This calculator is best for trend tracking and comparison, not as a single definitive score of business health.

Common questions

What is a good inventory turnover ratio?

There is no universal “good” number. A grocery business often has higher turnover than a furniture store. The most practical benchmark is your own history and competitors in the same category. If your turnover is falling while sales are stable, it can suggest overbuying or slower demand. If turnover is rising and stockouts are increasing, it can suggest underbuying.

Should I use sales instead of COGS?

Most accounting and finance definitions use COGS because inventory is recorded at cost, not selling price. Using sales can inflate turnover and make comparisons misleading. If you only have sales available, you can still track a “sales turnover” trend, but do not compare it directly to standard industry turnover ratios.

Why does the calculator ask for days in the period?

Days in the period is used to convert turnover into days of inventory on hand. For annual reporting, 365 is common. Some models use 360 for simplicity. For monthly tracking, you can use 30 or the actual days in that month. Pick one method and keep it consistent so your results are comparable.

What does days of inventory on hand tell me?

It estimates how long inventory sits before it is sold. For example, 45 days on hand means your typical item stays in inventory for about a month and a half. This metric helps you think in time, which is often easier for planning purchasing cycles, warehouse capacity, and cash flow needs.

What can cause inventory turnover to look wrong?

Turnover can be distorted by large one-time purchases, seasonal spikes, stock write-downs, pricing changes, or inconsistent inventory valuation methods. If your inventory levels swing a lot during the period, the beginning and ending average may not reflect reality. In that case, consider using an average of monthly inventory balances for better accuracy.