Inventory Turnover Calculator
Compute inventory turnover and days sales of inventory from cost of goods sold and average inventory.
Input Data
Results
At a glance:Inventory turnover = COGS ÷ average inventory, measuring how many times stock is sold and restocked in a period. Days inventory = 365 ÷ turnover, the average days to sell a batch. Higher turnover / fewer days = faster sales and less capital tied up; too low means overstock, slow-moving goods and obsolescence risk; too high may mean stockouts. Use COGS (cost basis) not revenue, and smooth inventory across periods. Levels vary hugely by industry.
Formula
Inventory turnover = COGS ÷ average inventory.
Days inventory = 365 ÷ inventory turnover.
$$\text{Inventory Turnover} = \dfrac{\text{COGS}}{\text{Average Inventory}}$$$$\text{Days Inventory} = \dfrac{365}{\text{Inventory Turnover}}$$How to Use
- Enter the cost of goods sold in the period.
- Enter the average inventory (beginning + ending is best).
- View the turnover and days inventory.
COGS fixed at HK$3,000,000 — turnover and days as average inventory rises
| COGS (HK$) | Avg inventory (HK$) | Turnover | Days |
|---|---|---|---|
| 3,000,000 | 250,000 | 12 | ~30 |
| 3,000,000 | 500,000 | 6 | ~61 |
| 3,000,000 | 750,000 | 4 | ~91 |
| 3,000,000 | 1,000,000 | 3 | ~122 |
Case Studies
Case 1: Turnover reflects capital efficiency
A fast-moving-consumer-goods retailer has COGS HK$3,000,000 and average inventory only HK$250,000 → turnover 12 times, days ~30 — stock sells and restocks in a month, very fast capital cycle.
A peer over-bought to HK$1,000,000 average inventory → turnover 3, days ~122, four months of stock in the warehouse — tying up capital and risking expiry for FMCG. Same sales, different inventory discipline means different efficiency.
Case 2: Higher is not always better
An electronics shop cut inventory to the bone to boast a high turnover, but in peak season or supply delays the shelves went empty, missing sales and hurting experience.
Lesson: too low means waste, but too high may mean under-stocking and lost sales. Balance capital efficiency against supply stability; compare with peers, not chase the maximum turnover.
FAQ
Should the numerator be COGS or revenue?
Use COGS. Inventory is carried at cost, so the numerator must be cost-based for consistency; using revenue (with margin) overstates turnover. Unless only revenue is available and you know the basis gap, COGS is the accurate choice.
Is higher turnover always better?
Moderate is best. High turnover signals strong sales and less tied-up capital, but too high may mean under-stocking, stockouts and lost sales; too low means overstock, capital tied up and obsolescence risk. Compare with peers and your own history; balance stockout vs holding cost.
How to read days inventory?
Days inventory = 365 ÷ turnover, the average days to sell a batch. Fewer days = faster cash conversion. Combine with receivables and payables days to compute the cash conversion cycle.
Does DIO relate to the cash conversion cycle (CCC)?
Yes. Days inventory outstanding (DIO) = 365 ÷ turnover is one of the three components of the cash conversion cycle: CCC = DSO + DIO − DPO. DIO is how long cash is stuck in inventory; a longer DIO lengthens the CCC and pressures working capital. Shortening DIO speeds up cash recovery — a key way to improve cash flow. Pair with the receivables-turnover and CCC calculators.
Why COGS and not revenue as the numerator?
Because of valuation consistency. Inventory is recorded at cost; revenue includes the profit markup. Dividing revenue by cost-basis inventory compares 'price with profit' to 'cost without profit', overstating turnover (more so for high-margin firms). COGS keeps both sides cost-based, truly reflecting how fast stock is consumed. Some simplified sources use revenue when COGS is unavailable — that number runs high; confirm the same basis before comparing firms. This calculator uses the standard COGS ÷ average inventory; average inventory is usually beginning + ending to smooth seasonality.
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References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.