Inventory turnover is a ratio that measures how many times a business sells and replaces its inventory over a given period, typically a year. It indicates how efficiently a company manages its stock.
Inventory Turnover = Cost of Goods Sold (COGS) / Average Inventory
The direct costs of producing the goods you sold during the period. Found on your income statement.
(Beginning Inventory + Ending Inventory) / 2. Smooths out seasonal fluctuations.
| Metric | Value |
|---|---|
| Annual COGS | $500,000 |
| Beginning Inventory | $80,000 |
| Ending Inventory | $120,000 |
| Average Inventory | $100,000 |
| Inventory Turnover | 5.0 |
In this example, the business sold through its inventory 5 times during the year. That means, on average, inventory sat for about 73 days before being sold (365 / 5 = 73 days).
Enter your values below to calculate your inventory turnover ratio and days sales of inventory.
Annual cost of goods sold
Inventory value at period start
Inventory value at period end
Average Inventory
$100,000
($80,000 + $120,000) / 2
Inventory Turnover
5.0 turns
per year
Days Sales of Inventory
73 days
365 / turnover ratio
Interpretation: Your inventory turns over 5.0 times per year. On average, items sit in inventory for 73 days before being sold.This is a healthy turnover rate for most industries. Good inventory management!
Turnover varies significantly by industry. Here are typical ranges:
12-20
turns per year
4-6
turns per year
6-10
turns per year
4-8
turns per year
3-5
turns per year
1-2
turns per year
Use historical sales data and seasonality patterns to order the right quantities at the right time.
Work with suppliers to shorten delivery times. Shorter lead times mean you can order less safety stock.
Use promotions, bundles, or liquidation to move dead stock. It frees up cash and warehouse space.
Set reorder points per SKU based on lead time and demand variability. Avoid blanket thresholds.
Focus on A-items (high value, high velocity). These drive most of your turnover and deserve close attention.
StockZip inventory management gives you real-time visibility into stock levels, movement history, and valuation — the data you need to calculate and improve your inventory turnover.
Common questions about scanning, offline mode, pricing, and migration.
It varies by industry. Grocery and perishables often see 12-20 turns per year. Retail clothing might be 4-6 turns. Luxury goods or heavy equipment might be 1-2 turns. Compare to your industry benchmarks, not a universal number.