Inventory Turnover Calculator Formula

Understand the math behind the inventory turnover calculator. Each variable explained with a worked example.

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Formulas Used

Inventory Turnover

inventory_turnover = (inventory_start + inventory_end) > 0 ? cogs / ((inventory_start + inventory_end) / 2) : 0

Days to Sell Inventory

days_to_sell = (inventory_start + inventory_end) > 0 ? 365 / (cogs / ((inventory_start + inventory_end) / 2)) : 0

Average Inventory

avg_inventory = (inventory_start + inventory_end) / 2

Variables

VariableDescriptionDefault
cogsCost of Goods Sold (COGS)(USD)600000
inventory_startInventory (Beginning)(USD)80000
inventory_endInventory (End)(USD)120000

How It Works

How to Calculate Inventory Turnover

Formula

Inventory Turnover = Cost of Goods Sold / Average Inventory Days to Sell Inventory = 365 / Inventory Turnover

Inventory turnover tells you how many times you cycle through your entire stock during a year. Higher turnover means products sell quickly, tying up less cash in warehoused goods. The days-to-sell metric converts this into a more intuitive timeframe showing how long the average item sits before being sold.

Worked Example

A retailer has $600,000 in COGS. Inventory was $80,000 at the start of the year and $120,000 at the end.

cogs = 600000inventory_start = 80000inventory_end = 120000
  1. 01Average Inventory = ($80,000 + $120,000) / 2 = $100,000
  2. 02Inventory Turnover = $600,000 / $100,000 = 6.0
  3. 03Days to Sell = 365 / 6.0 = 60.8 days
  4. 04Inventory cycles through about 6 times per year.

Ready to run the numbers?

Open Inventory Turnover Calculator