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Inventory Turnover Ratio Calculator

Compute stock efficiency using COGS and Average Inventory. Compare your Turnover and Days Sales of Inventory (DSI) against industry benchmarks.

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About

Inventory Turnover is a critical efficiency ratio that reveals how effectively a company manages its stock. It measures the number of times inventory is sold and replaced over a specific period. A low turnover implies weak sales or excess stocking (holding costs), while an excessively high ratio might indicate inadequate inventory levels leading to lost sales opportunities.

This tool calculates both the Turnover Ratio and the Days Sales of Inventory (DSI), representing the average time it takes to convert stock into revenue. Uniquely, it provides contextual analysis by benchmarking your results against industry standards, offering immediate insight into whether your supply chain is performing at, above, or below sector par.

inventory turnover dsi calculator supply chain business metrics accounting tool

Formulas

The calculation requires the Cost of Goods Sold (COGS) and the Average Inventory for the period.

AvgInv = Invbegin + Invend2
Turnover = COGSAvgInv

To convert this into a time-based metric (Days Sales of Inventory):

DSI = 365Turnover

Reference Data

Industry SectorAvg Turnover RatioAvg Days to Sell (DSI)Characteristics
Grocery / Perishables14.0 - 18.020 - 26 daysHigh volume, low margin, spoilage risk.
Automotive (New)2.5 - 3.5100 - 145 daysHigh value items, slow movement.
Apparel / Clothing4.0 - 6.060 - 90 daysSeasonal cycles drive turnover.
Consumer Electronics8.0 - 10.036 - 45 daysRapid obsolescence requires speed.
Furniture2.0 - 4.090 - 180 daysBulky storage, discretionary spend.

Frequently Asked Questions

Not necessarily. While a high ratio indicates strong sales, an extremely high ratio compared to the industry average might mean you are under-stocking. This leads to "stockouts", where customers can't buy what they want, causing lost revenue and brand damage.
Always use the "Average Inventory" ((Beginning + Ending) / 2) rather than just the ending balance. Inventory levels fluctuate seasonally; using a single point in time can skew the ratio significantly.
The ratio compares inventory (recorded at cost) to sales. To keep the units consistent, we must use the Cost of Goods Sold (COGS). Using "Sales Revenue" (which includes profit margin) would inflate the ratio falsely.
Strategies include improving demand forecasting, clearing out obsolete "dead stock" via discounts, ordering smaller batches more frequently (JIT), and reducing lead times with suppliers.