Inventory Turnover Ratio Calculator
How many times a year you sell through your stock, how many days it sits on the shelf, and how much cash a faster turn would free.
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- Formula and worked example included
Inventory Turnover Calculator
Enter your figures to see results.
What is inventory turnover, in plain terms?
Inventory turnover is how many times a year you sell through and replace your stock. Turn it round and you get the number of days an average item sits on the shelf before it sells. A low turn means cash is sleeping in the stockroom; a very high one means you may be running out of things customers want.
How to use this calculator
- Enter your cost of goods sold for the period, at cost not selling price.
- Enter your average stock value. Opening plus closing stock, divided by two, is fine.
- Set the days in the period (365 for a year) to see turns, days in stock and the cash a faster turn would free.
What your result means
How to read the figure, what counts as normal, and what to do about it.
What the ratio tells you
Inventory turnover measures how many times you sell and replace your stock in a period. Turn it upside down and you get days inventory outstanding, the average number of days an item waits before it is sold. Together they describe how much of your cash is sleeping on shelves.
A higher turn is generally better: less capital tied up, less storage, less obsolescence and shrinkage. But too high a turn means stock-outs and lost sales, so the target depends on the trade-off between holding cost and service level in your sector.
Benchmarks by type of business
| Business type | Turns per year | Days in stock |
|---|---|---|
| Grocery / convenience | 12–20 | 18–30 |
| Restaurant (food stock) | 25–50 | 7–15 |
| Fashion retail | 4–6 | 60–90 |
| Builders' merchant / trade supplies | 4–8 | 45–90 |
| E-commerce general | 6–10 | 35–60 |
| Furniture / jewellery | 1.5–3 | 120–240 |
| Manufacturing (finished goods) | 4–6 | 60–90 |
Turning the ratio into cash
The calculator shows the cash tied up per day of stock. If you hold 90 days of stock and could operate on 75 by reordering more often, the 15 days released is cash you can use elsewhere, often tens of thousands of pounds for a modest retailer. Analyse turnover by product line, not just in total: a handful of slow lines usually hides behind a healthy average.
Worked example: an independent bike shop
Over a year the shop's cost of goods sold was £240,000. Stock at cost was £70,000 in January and £50,000 in December, so average inventory is £60,000.
Turnover = 240,000 ÷ 60,000 = 4 turns a year. Days inventory outstanding = 365 ÷ 4 = about 91 days.
Cost of goods sold per day is £657, so every day of stock trimmed frees about £657. Bringing DIO to 75 days would release roughly £10,500 of cash.
Frequently asked questions
Is a high inventory turnover always good?
Not necessarily. Very high turnover can mean you are running out of popular lines and losing sales, or buying in small, expensive quantities. Aim for the highest turn that still keeps availability where customers expect it.
Why use cost of goods sold rather than sales?
Inventory is recorded at cost. Dividing sales (at selling price) by stock (at cost) mixes two different valuations and overstates the ratio by your margin.
How often should I calculate it?
Quarterly for the business as a whole and monthly for your top product lines. Trends matter more than a single figure.
What is the link with cash flow?
Stock is cash you have already spent. Days inventory outstanding, together with debtor days and creditor days, makes up your cash conversion cycle, the number of days between paying suppliers and being paid by customers.
The maths behind this calculator
For anyone who wants to check the working or rebuild it in a spreadsheet.
The formulas
Inventory turnover = Cost of goods sold ÷ Average inventory Days inventory outstanding = Days in period ÷ Inventory turnover Average inventory = (Opening inventory + Closing inventory) ÷ 2
Use cost of goods sold, not revenue, so both sides of the ratio are at cost. Using revenue inflates the ratio by your gross margin.
Assumptions and limits
- Inventory is valued at cost on a consistent basis (FIFO or weighted average). Mixing bases distorts the ratio.
- A two-point average of opening and closing stock can hide seasonal peaks; use monthly averages if stock varies a lot through the year.
- Includes only stock held for sale. Consumables and fixed assets are excluded.
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