Updated · Built and checked by the PlinzoTools team, formulas tested against published sources
Calculate inventory turnover ratio and average days to sell inventory.
Inventory turnover measures how many times a business sells and replaces its inventory over a period -- a key efficiency metric for retail and product businesses.
Enter cost of goods sold (COGS) and average inventory value. Turnover ratio and days to sell appear instantly.
Turnover Ratio = COGS / Average Inventory Value
Days to Sell Inventory = 365 / Turnover Ratio
Suppose a hypothetical retailer had a cost of goods sold of 500,000 over the year and held an average inventory worth 100,000. Dividing 500,000 by 100,000 gives a turnover ratio of 5.00, which the tool shows as 5.00x. The days-to-sell figure is 365 divided by 5, or 73.0 days. In plain terms, the shop sells through and replaces its whole stock about five times a year, and a typical item sits for around two and a half months. Those are the values preloaded in the calculator.
500,000 / 100,000 = 5.00x; 365 / 5.00 = 73.0 days
Average inventory is typically the beginning inventory plus the ending inventory, divided by two. For a business with strong seasonality, that simple average can be misleading. A toy seller may have tiny stock in January and huge stock in November, so an average of only those two dates would miss the peaks. In that case, average several points through the year, such as month-end balances. Whatever method you use, apply it consistently so year-to-year comparisons mean something.
The formula uses cost of goods sold, not revenue. Entering sales revenue instead will inflate the ratio, because revenue includes your markup. Inventory is also recorded at cost, so the numerator and denominator need to be on the same basis. Make sure the COGS covers the same period as the inventory average, and remember that the days-to-sell result always uses 365 days, so an annual COGS is the natural pairing. If you enter a quarterly COGS, the ratio will be a quarterly figure, but the days-to-sell result will still divide 365 by that ratio and will be overstated. Annualize a quarterly COGS first by multiplying by four.
A higher turnover generally means less cash is tied up in unsold goods and lower storage and obsolescence risk. A lower turnover may point to overbuying, weak demand, or slow-moving lines. However, very high turnover can also mean that you frequently run out of stock and lose sales, or that you are buying in small quantities at worse prices. The right level depends on the type of product. Perishable goods and fast fashion should turn over quickly, while furniture or specialty equipment can reasonably move slowly. Compare your own results over time, and against businesses in your own sector, rather than against a general number.
Treat the result as one signal. A drop in turnover after a deliberate stock build ahead of a peak season is not necessarily a problem, so check the context behind any change.
Generally yes (less capital tied up in unsold stock), but extremely high turnover can also indicate insufficient inventory to meet demand -- context and industry norms matter.
Cost of goods sold divided by average inventory value for the same period. If COGS is 600,000 and average inventory is 150,000, inventory turns over 4 times.
The tool divides 365 by the turnover ratio, so a turnover of 4 gives about 91 days. It always assumes a 365-day year, so if your COGS covers a shorter period, annualise it first.
COGS. Sales include your markup, which inflates turnover; COGS is measured at cost, the same basis as inventory value.
Add the opening and closing inventory value for the period and divide by two, or average several month-end figures if your stock changes a lot during the year.
Reference: Consumer Financial Protection Bureau