What is inventory turnover ratio?

Inventory turnover ratio measures how many times you sell and replace inventory in a period. Higher turnover means you're selling inventory quickly and efficiently.

How do you calculate inventory turnover?

Inventory Turnover = Cost of Goods Sold (COGS) / Average Inventory Value. Days to Sell = 365 / Inventory Turnover.

What does low inventory turnover mean?

Low inventory turnover indicates slow-moving stock, which ties up cash, increases storage costs, and may lead to obsolete inventory. It suggests you may need to reduce prices, improve marketing, or adjust purchasing.

How can I improve my inventory turnover?

Improve inventory turnover by optimizing stock levels, improving demand forecasting, running promotions on slow-moving items, negotiating better supplier terms, and implementing just-in-time inventory practices.

Free Inventory Turnover Calculator

Calculate Your Inventory Turnover

Cost of Goods Sold (COGS) Annual or period total

$

Beginning Inventory

$

Ending Inventory

$

How to Use This Calculator

1. Enter COGS: Your total cost of goods sold for the period (usually annual)
2. Enter Beginning Inventory: Inventory value at the start of the period
3. Enter Ending Inventory: Inventory value at the end of the period
4. View Results: See your turnover ratio, days to sell, and average inventory

Understanding the Formulas

Average Inventory

Average Inventory = (Beginning Inventory + Ending Inventory) / 2

The average value of inventory held during the period.

Inventory Turnover Ratio

Inventory Turnover = COGS / Average Inventory

How many times you sold and replaced inventory during the period.

Days to Sell Inventory

Days to Sell = 365 / Inventory Turnover

Average number of days it takes to sell your entire inventory.

Industry Benchmarks

Industry	Typical Turnover	Days to Sell
Grocery/Supermarket	15-20x	18-24 days
Restaurants	12-15x	24-30 days
Electronics	6-8x	45-60 days
Clothing/Apparel	4-6x	60-90 days
Furniture	3-5x	73-120 days
Jewelry	1-2x	180-365 days

* These are general benchmarks. Your optimal turnover depends on your specific business model.

Example Calculation

Scenario: You run an online electronics store.

• Annual COGS: $120,000
• Beginning Inventory: $8,000
• Ending Inventory: $12,000

Step 1: Calculate Average Inventory

($8,000 + $12,000) / 2 = $10,000

Step 2: Calculate Inventory Turnover

$120,000 / $10,000 = 12 times per year

Step 3: Calculate Days to Sell

365 / 12 = 30.4 days

Result: You turn over inventory 12 times per year, selling your entire stock every 30 days. This is excellent for electronics!

How to Improve Inventory Turnover

🎯

Improve Demand Forecasting

Use historical data and trends to predict demand more accurately. Stock what sells.

📦

Reduce Slow-Moving Items

Identify and discount slow sellers. Use ABC analysis to focus on high-turnover products.

⚡

Implement Just-In-Time (JIT)

Order inventory closer to when you need it. Reduces holding costs and improves turnover.

💰

Run Promotions on Excess Stock

Clear out old inventory with sales, bundles, or discounts to free up cash.

🤝

Negotiate Better Terms with Suppliers

Smaller, more frequent orders reduce inventory levels while maintaining stock availability.

Frequently Asked Questions

What is a good inventory turnover ratio?

It varies by industry. Generally, 5-10x is good for most retail businesses. Higher turnover means better efficiency, but too high may indicate stockouts and lost sales.

Is higher inventory turnover always better?

Not always. Very high turnover might mean you're running out of stock frequently, losing sales. The goal is to find the sweet spot where you minimize carrying costs without stockouts.

What if my turnover is too low?

Low turnover means inventory is sitting too long, tying up cash. Solutions: discount slow items, improve marketing, reduce order quantities, or discontinue poor sellers.

Should I calculate turnover for individual products?

Yes! Product-level turnover helps identify winners and losers. Focus on high-turnover products and phase out slow movers.

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Finxa OS automatically calculates inventory turnover for your entire catalog and individual products. Get real-time insights.

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Inventory Turnover Calculator