Business calculators
Inventory turnover calculator.
See how many times you sold through your inventory in a period, and how many days a unit sits on the shelf on average.
Inventory turnover = cost of goods sold ÷ average inventory. Average inventory is (beginning + ending) ÷ 2. Days inventory outstanding (DIO) = days in period ÷ turnover.
Inputs
Result
Worked retail example
A retailer has $600,000 of COGS for the year, $100,000 of inventory at the start and $140,000 at the end. Average inventory is ($100,000 + $140,000) ÷ 2 = $120,000. Turnover is $600,000 ÷ $120,000 = 5.0 times. DIO is 365 ÷ 5.0 = 73 days.
Formulas and sources
The SEC's Beginners' Guide to Financial Statements defines Inventory Turnover Ratio as cost of sales divided by average inventory for the period, and explains that a ratio of 2 to 1 means inventory turned over twice in the period. Days inventory outstanding is simple arithmetic on that ratio (days in period divided by turnover); the SEC guide does not use the DIO name.
COGS or sales?
Use COGS. Inventory is carried at cost, so dividing sales (which include your markup) by it inflates the ratio and shortens DIO. The sales option is provided only for matching a benchmark that uses it.
Limits
A high turnover can mean efficient buying or stock-outs; a low one can mean overstock or slow lines. Seasonal businesses should check the average with more than two data points. This is a math tool, not accounting advice, and no figure here is an industry benchmark.