How many times a year inventory is sold and replaced, and how many days it sits on the shelf.
(Opening inventory + closing inventory) ÷ 2, or the average of monthly balances.
Example Result
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The calculated result will appear here after you press Calculate.
Estimates for planning only; not financial, tax or investment advice. See our Disclaimer.
Inventory is money sitting in a warehouse. Inventory turnover measures how fast that money comes back: it divides a year's cost of goods sold by the average inventory held during the year, giving the number of times the stock was sold and replaced. The calculator also converts the ratio into days inventory outstanding — the average number of days an item waits between arriving and being sold — which is the form most managers find easier to act on. A turnover of 6.25 (58 days) in a business that used to turn 8 (46 days) means stock is building up faster than sales; a turnover of 30 (12 days) in a florist's is normal and in a furniture store would be impossible. Enter the two figures from your accounts; the guide below explains why the numerator is COGS and not sales, how to compute the average, what counts as a good number, and where the result goes next.
Enter the year's cost of goods sold (multiply a quarter's figure by four).
Enter the average inventory: (opening + closing) ÷ 2, or the average of monthly balances for a seasonal business.
Press Calculate to see turnover and days inventory outstanding.
By O.E. — Partner, chairman of the board and CEO of a metal products manufacturer for 21 years; the company exports to 45 countries.
Drafted with AI assistance; calculations checked against primary sources and tested with the site's own code. About FlowUtil
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Inventory turnover = cost of goods sold ÷ average inventory: 500,000 ÷ 80,000 = 6.25 times a year. Days inventory outstanding (DIO) = 365 ÷ turnover = 58 days (equivalently average inventory ÷ COGS × 365). The two outputs are reciprocals: a higher turnover is a shorter shelf time. The calculator assumes the COGS figure covers one year (365 days); if you enter a quarter's COGS, multiply it by four first.
Why cost of goods sold, not sales: inventory is carried on the balance sheet at cost, so it must be compared with sales at cost — the cost of goods sold line of the income statement — not with revenue. Using revenue inflates the ratio by the gross margin: Example 1's business, if it sells $500,000 of goods for $800,000, would show a turnover of 10 instead of 6.25 and a DIO of 37 days instead of 58, which is not what happens on the shelf. Some data providers publish a sales-based ratio (the Census inventories-to-sales ratio below is one); when you compare, make sure both figures use the same numerator.
| Symbol | Meaning |
|---|---|
| COGS | Cost of goods sold for one year |
| Average inventory | (Opening + Closing) ÷ 2, or the average of monthly balances |
| Turnover | COGS ÷ Average inventory, times per year |
| DIO | 365 ÷ Turnover, days |
Average inventory = (inventory at the start of the period + inventory at the end) ÷ 2. For Example 1, $70,000 at the start of the year and $90,000 at the end gives $80,000. Two cautions:
1A wholesaler: COGS $500,000, average inventory $80,000.
500,000 ÷ 80,000; 365 ÷ 6.25
Turnover 6.25× · 58 days
Stock is replaced about every two months.
2A slow-moving specialist: COGS $120,000, average inventory $30,000.
120,000 ÷ 30,000; 365 ÷ 4
Turnover 4.00× · 91 days
A quarter of the year's cost of sales is on the shelf at any time — acceptable for furniture or jewellery, a warning sign for groceries.
3A fast-moving distributor: COGS $2,400,000 on $150,000 of average stock.
2,400,000 ÷ 150,000; 365 ÷ 16
Turnover 16× · 23 days
Each dollar of inventory supports $16 of annual cost of sales; the business needs little working capital for stock but has little buffer if a supplier is late.
4Reading a change: Example 1's business grows COGS to $600,000 the next year but average inventory to $120,000.
600,000 ÷ 120,000 = 5.0; 365 ÷ 5
Turnover falls from 6.25× to 5.0×; DIO rises from 58 to 73 days
Sales grew 20%, stock 50%: the difference is cash tied up — $120,000 − $96,000 (what 6.25× would have needed) = $24,000 of extra working capital, before asking whether some of it is obsolete.
There is no universal number; the right comparison is your own history and your industry. As a reference point for the economy as a whole, the U.S. Census Bureau's monthly inventories-to-sales ratio for all businesses stood at 1.33 at the end of August 2026 (1.40 a year earlier) — that is, total inventories equal to about 1.33 months of sales, roughly 40 days. That ratio uses sales rather than cost, so it is not directly the turnover computed here, but the direction of its movement is the same signal: a rising ratio means stock accumulating relative to sales. Within that average, grocers turn stock dozens of times a year, car dealers and furniture retailers only a few times, and manufacturers of long-lead-time equipment fewer still.
A ratio that is too high has its own cost: stock-outs, lost sales, rush orders and small, frequent deliveries. The aim is the lowest inventory that still serves customers, not the highest possible turnover.
Days inventory outstanding is the first leg of the cash conversion cycle: DIO + days sales outstanding (how long customers take to pay) − days payable outstanding (how long you take to pay suppliers). Example 1's 58 days of inventory, plus 45 days to collect, minus 30 days of supplier credit, is a 73-day cycle — the time cash is tied up between paying for goods and receiving payment for them. The Cash Conversion Cycle Calculator combines the three, and the Working Capital Calculator shows how much money that cycle needs.