Inventory turnover calculator
- Formula
- COGS ÷ Average inventory
Inventory turnover = COGS ÷ Average inventory365 for a year.
Inventory turnover
8.00×
How it’s worked out
- 1Average inventory($420,000 + $480,000) ÷ 2$450,000
- 2COGS ÷ average inventory$3,600,000 ÷ $450,0008.00×
- 3Days per turn365 ÷ 8.0045.6 days
Runs in your browser; nothing you type is sent anywhere. Amounts in US dollars.
Worked on a real month of books
Northwind Traders, Inc., September 2026 (accrual basis, USD), the month the free course is taught on. It is the company's first month, so opening inventory was zero — which halves the average and flatters the turnover. One month is a short window for this ratio. Every figure is read off the course's posted ledger, not typed.
- 1Average inventory($0 + $1,000) ÷ 2$500
- 2Cost of revenue ÷ average inventory$17,000 ÷ $50034.00×
See the statements these come from in the course.
How to read it
Inventory turnover counts how many times the average stock was sold through in the period. Higher means less cash sitting on shelves.
Too high can also be a problem: stock-outs and lost sales. Read it with gross margin and DIO.
Common mistakes
- Dividing sales, not cost of goods sold, by inventory — which mixes selling prices with costs.
- Using a single year-end balance in a seasonal business.
Questions
- What is a good inventory turnover?
- It depends on the industry: grocery turns stock dozens of times a year, furniture a handful. Compare against the company's own history and its peers.
- Why use average inventory?
- The average smooths out a balance that swings within the period. With only a closing figure, the result depends on the day the period happened to end.
Read it with
The metrics read alongside this one, and the terms it is confused with.
- DIO calculatorDIO is a liquidity and working-capital metric, calculated as (Inventory ÷ COGS for the period) × Days in the period.Calculator
- Cash conversion cycle calculatorCCC is a liquidity and working-capital metric, calculated as DSO + DIO − DPO.Calculator
- Receivables turnover calculatorReceivables turnover is a liquidity and working-capital metric, calculated as Credit sales ÷ Average AR.Calculator
- Inventory turnoverInventory turnover is a liquidity and working-capital metric, calculated as COGS ÷ Average inventory.Term
The formula is the one the glossary states, and the arithmetic is unit-tested. A ratio with nothing to divide by shows a dash — undefined is not zero. General information, not financial advice.