C

Inventory Turnover Calculator

Calculate your inventory turnover ratio to measure how efficiently your business manages inventory. Get detailed analysis and industry benchmarks to optimize your inventory management strategy.

Calculate Inventory Turnover

Cost of Goods Sold ($)
Average Inventory ($)
Calculation Period

Your Results

5
Inventory Turnover Ratio
Good

Detailed Analysis

Days in Inventory
Average time inventory sits
73 days
Annual Turnover
Times inventory turns per year
5x
Interpretation
Good inventory turnover shows effective inventory management with room for improvement.

Inventory Turnover Categories by Industry

High Turnover Industries

Grocery Stores10-15x

Perishable goods require fast turnover

  • • Fresh produce
  • • Dairy products
Automotive Parts6-12x

Regular maintenance needs

  • • High demand items
  • • Seasonal variations
Clothing Retail4-6x

Fashion trends drive sales

  • • Seasonal collections
  • • Style changes

Lower Turnover Industries

Furniture Stores2-4x

Durable goods with longer life

  • • High-value items
  • • Infrequent purchases
Jewelry Stores1-3x

Luxury items with slow movement

  • • High investment value
  • • Seasonal demand
Heavy Machinery0.5-2x

Specialized equipment

  • • Long-term investments
  • • Custom orders

How to Calculate Inventory Turnover

Inventory Turnover Formula

Basic Formula: Inventory Turnover = Cost of Goods Sold ÷ Average Inventory
Days in Inventory: 365 ÷ Inventory Turnover Ratio

Calculation Steps:

  1. 1
    Determine Cost of Goods Sold (COGS)
    Total cost of products sold during the period
  2. 2
    Calculate Average Inventory
    (Beginning Inventory + Ending Inventory) ÷ 2
  3. 3
    Apply the formula
    Divide COGS by Average Inventory to get turnover ratio

Important Considerations

⚠️ Industry Variations

Inventory turnover ratios vary significantly by industry. Compare your results to industry benchmarks for meaningful analysis.

📊 Seasonal Variations

Inventory turnover can vary by season

  • • Holiday shopping seasons
  • • Weather-dependent products
  • • Back-to-school periods
💰 Cost Considerations

High turnover isn't always better

  • • Stockout costs vs. holding costs
  • • Ordering frequency impact
  • • Customer satisfaction balance
📈 Business Growth

Growth affects inventory turnover

  • • Rapid growth may lower ratios
  • • New product introductions
  • • Market expansion effects
⚠️ Red Flags

Watch for concerning patterns

  • • Declining turnover trends
  • • Excessive inventory levels
  • • Cash flow implications

Example Cases

Case 1: Electronics Retail Store

Input Parameters: COGS: $2,400,000
Average Inventory: $400,000
Period: Yearly
Turnover Ratio: 6.0x
Days in Inventory: 61 days
Category: Good

Use Case: Electronics retailer with efficient inventory management. Inventory turns 6 times per year, indicating good sales performance.

Case 2: Furniture Manufacturing Company

Input Parameters: COGS: $1,200,000
Average Inventory: $800,000
Period: Yearly
Turnover Ratio: 1.5x
Days in Inventory: 243 days
Category: Below Average

Use Case: Furniture company with slow-moving inventory. Low turnover indicates potential overstocking or need for better demand forecasting.

Frequently Asked Questions

What is inventory turnover ratio?
Inventory turnover ratio measures how efficiently a company manages its inventory by calculating how many times inventory is sold and replaced over a specific period. It indicates how quickly a company can convert its inventory into sales.
How is inventory turnover calculated?
Inventory turnover is calculated by dividing the cost of goods sold (COGS) by the average inventory value. The formula is: Inventory Turnover = Cost of Goods Sold ÷ Average Inventory. Higher ratios indicate more efficient inventory management.
What is a good inventory turnover ratio?
A good inventory turnover ratio varies by industry. Generally, ratios above 4-6 are considered good, while ratios below 2 may indicate overstocking or slow-moving inventory. Retail businesses typically aim for 4-6, while manufacturing may have 6-12.
How can I improve my inventory turnover?
To improve inventory turnover: optimize purchasing decisions, implement just-in-time inventory, improve demand forecasting, reduce lead times, offer promotions for slow-moving items, and regularly review and adjust inventory levels based on sales data.
How do inventory turnover ratios vary by industry?
Inventory turnover varies significantly by industry. Grocery stores typically have 10-15, clothing retailers 4-6, automotive parts 3-5, and furniture stores 2-4. Compare your ratio to industry benchmarks for meaningful analysis.

Related Calculators