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Inventory Turnover Calculator

Calculate your inventory turnover ratio to measure sales efficiency and stock health.

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Free Inventory Turnover Calculator | Measure Stock Efficiency

What is Inventory Turnover?

Inventory turnover is a key metric that shows how many times a company has sold and replaced inventory during a given period. A higher turnover generally indicates strong sales or effective inventory management, while a lower turnover may suggest overstocking or weak sales.

The Formula

The inventory turnover ratio is calculated as:

$$

\text{Inventory Turnover} = \frac{\text{Cost of Goods Sold (COGS)}}{\text{Average Inventory}}

$$

Where:

  • COGS: The direct costs attributable to the production of the goods sold in a company.
  • Average Inventory: The average value of inventory during the period (usually (Beginning Inventory + Ending Inventory) / 2).

    • Why It Matters

  • Cash Flow: Faster turnover means cash is tied up in inventory for less time.
  • Storage Costs: Lower turnover means higher storage and holding costs.
  • Obsolescence: Slow-moving inventory risks becoming obsolete or expired.

    • How to Use This Calculator

  • Enter COGS: Input your total Cost of Goods Sold for the period (e.g., 1 year).
  • Enter Inventory Values: Input your beginning and ending inventory values.
  • Get Results: See your turnover ratio and the average days it takes to sell your inventory.

    • Interpreting Your Score

  • High Ratio: Strong sales or insufficient inventory (risk of stockouts).
  • Low Ratio: Weak sales or overstocking (risk of obsolescence).
  • Days to Sell: The average number of days it takes to clear your inventory.

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