Calculate inventory turnover ratio and days sales in inventory. Compare to industry benchmarks for retail, manufacturing, wholesale, and more. Free analysis.
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Inventory turnover is one of the most important metrics for measuring how efficiently a business manages its stock. It tells you how many times your inventory is sold and replaced over a given period. A higher turnover generally indicates strong sales and effective inventory management, while lower turnover may signal overstocking, weak demand, or obsolete products. This calculator provides your inventory turnover ratio, days sales in inventory (DSI), and compares your performance against industry benchmarks to help you optimize purchasing decisions and improve cash flow.
Inventory turnover ratio measures how many times a company sells and replaces its inventory during a specific period. It's calculated by dividing the Cost of Goods Sold (COGS) by Average Inventory. A turnover ratio of 6 means you sell through your entire inventory 6 times per year, or approximately every 61 days. The related metric Days Sales in Inventory (DSI) shows the average number of days it takes to sell your stock. Both metrics help businesses understand inventory efficiency, optimize stock levels, and improve working capital management.
Inventory Turnover Formulas
Turnover Ratio = COGS ÷ Average Inventory | DSI = 365 ÷ Turnover RatioKnow exactly how quickly your inventory is moving. Identify if stock is turning over too slowly, tying up capital, or too quickly, risking stockouts.
Every day inventory sits in your warehouse costs money – storage, insurance, depreciation, and opportunity cost. Faster turnover means lower carrying costs.
Faster inventory turnover means less capital tied up in stock and more cash available for operations, growth, or debt reduction.
Low turnover ratios often reveal slow-moving or obsolete inventory that should be discounted, bundled, or discontinued before it becomes worthless.
Compare your turnover ratio against industry standards. What's excellent for a jewelry store may be poor for a grocery chain.
Use turnover data to fine-tune reorder points, safety stock levels, and order quantities for better inventory management.
Inventory turnover is a key metric for lenders, investors, and financial analysts evaluating business health and operational efficiency.
Track inventory efficiency trends over time to identify improvements or emerging problems with stock management.
Use turnover data to determine optimal reorder quantities, timing, and which products deserve more or less shelf space.
Find items with turnover ratios significantly below category averages that should be marked down or discontinued.
Lenders evaluate inventory turnover as part of working capital analysis and overall business health assessment.
Demonstrate operational efficiency to stakeholders by showing strong inventory turnover compared to industry peers.
Analyze turnover by season to prepare for high-demand periods and avoid excess inventory during slow seasons.
Balance inventory levels with service requirements – find the sweet spot between stockouts and overstock.
A 'good' ratio varies significantly by industry. Grocery stores typically see 14-20x annually (selling inventory every 2-3 weeks), while luxury retailers may only turn 1-3x per year. For most retail businesses, 4-8x is healthy. The key is comparing against your specific industry benchmark rather than a universal standard.