Inventory is cash sitting on shelves. The inventory turnover calculator tells you how fast it moves: enter the cost of goods sold for the period and your inventory at the start and end (or your average directly), and you get the turnover — how many times the stock sold through — plus the days of stock, the average number of days each unit waits before it sells. Both numbers come from the same division, and both belong on the wall of anyone who buys stock.
¿Gestionas el stock en español? La versión en español explica vueltas al año y días de stock: Calculadora de Rotación de Inventario Negocio.
The formula
Turnover = cost of goods sold ÷ average inventory, with everything valued at cost — never at selling price, which would inflate the result by your markup. If you do not track a true average, (starting inventory + ending inventory) ÷ 2 is the standard approximation; if your stock is seasonal, average several points across the period instead, because a start/end pair measured at a peak and a trough will lie to you in whichever direction flatters the business. Days to sell = 365 ÷ turnover (use the period’s own length if you are measuring a quarter: 90 ÷ quarterly turnover).
Worked example
COGS of $120,000 over a year, inventory of $18,000 at the start and $22,000 at the end: average inventory = ($18,000 + $22,000) ÷ 2 = $20,000; turnover = 120,000 ÷ 20,000 = 6.0× per year; days to sell = 365 ÷ 6 = 60.8 days. In cash terms: at any moment, about two months of sales are sitting in the stockroom. If the same store lifted turnover to 8×, the average inventory needed for the same sales would fall to $15,000 — $5,000 of cash released without selling a single extra unit.
Reading the number
There is no universal “good” turnover: grocery and fresh goods turn over dozens of times a year, furniture and jewellery a handful. Compare against your own history and your category, and read the direction, not just the level. Falling turnover almost always means buying is outrunning selling — more sizes, more variants, more dead stock. Suspiciously high turnover is not automatically good either: it can mean chronic under-stocking and lost sales, which show up as healthy inventory numbers and disappointing revenue.
Store-wide vs per product
The store-wide figure is a health check; the decisions live one level down. Run the same calculation per product or category — most inventory systems can export COGS and average stock by line — and you will usually find a small set of lines turning at 1–2× subsidised by lines at 10×+. The slow lines are where the safety stock and reorder point tools linked below do their work, and where clearance decisions should start.
What “good” looks like, carefully
Published ranges by category are wide enough to be nearly useless as targets — supermarkets may turn stock 15–25× a year, clothing perhaps 4–8×, furniture 3–5×, and a specialist with slow, expensive lines can be healthy at 2×. What general experience does support: a turnover drifting down two periods in a row deserves investigation whatever the level, and a turnover far above your category’s norm deserves a stockout audit — count the days your top twenty lines were unavailable, and price the missing sales. If lost sales exceed the holding-cost savings, the “efficient” number was bought with revenue. Carrying cost itself is real money — storage, insurance, shrinkage and the financing of the stock commonly add up to a fifth to a third of the inventory’s value per year — so each point of turnover you gain releases both cash and cost.
Related tools
Versión en español: Calculadora de Rotación de Inventario Negocio — Vueltas al Año y Días de Stock Explicados · Safety Stock Calculator · Reorder Point Calculator.
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