Inventory turnover calculator
Inventory turnover and days on hand from the cost of goods sold.
Fill in the fields and the result will appear here automatically.
Annual inventory turnover compares a year of cost of goods sold with average inventory at cost. Using revenue would mix valuation bases and inflate the ratio by markup. Turnover does not mean every item physically sold the same number of times. Inventory days use a 365-day convention: an aggregate ratio rather than the measured age of every stocked unit.
How it works
Formula and logic
Turnover = annual COGS/average inventory. Inventory days = 365/turnover. In balance mode, average inventory = opening/2 + closing/2; balances are nonnegative and average inventory and annual COGS are positive. Fields from the other mode are unused. Another period requires its own day count instead of 365; this tool has no such field, so monthly COGS cannot be entered as annual.
Example
A cost of 600,000 against an average inventory of 150,000 gives a turnover of 4.00 times and 91.3 days on hand. Annual COGS 1 and average inventory 1 give 1 turn and 365 days.
Fields and units
- Annual cost of goods sold — $
- Average inventory — list option
- Average inventory — $
- Opening inventory — $
- Closing inventory — $
How to use
- — Enter one year of COGS using the inventory-cost basis, not revenue.
- — Choose a known average inventory or opening and closing balances for that same year.
- — For seasonal stock, an average of several regularly spaced observations can be more representative than two endpoints.
- — Compare consistent periods and valuation bases; displayed days always use 365.
- — Do not substitute monthly COGS for annual COGS: inventory days still use 365 and the result would change meaning.
Method and limitations
- Calculation method
- Formula and logic
- Data or methodology source
- OpenStax, Rice University: cost-based inventory turnover and a 365-day annual basis
- Limitation
- Annual COGS and a 365-day convention. Two endpoint balances may poorly represent seasonal average inventory.
FAQ
Why cost of goods sold rather than revenue?
Because inventory is carried at cost. Dividing revenue by it would add the whole trade margin to the turnover and overstate it.
How do I work out average inventory?
The simplest way is the half-sum of the opening and closing balances — that mode is built in. Monthly averages are more accurate if you have them.
What do days on hand show?
It is average inventory divided by average daily COGS on a 365-day annual basis. It helps compare periods but does not establish an individual item’s actual sale date or shelf life.
What turnover is considered normal?
It depends on the sector: groceries turn many times faster than furniture. No benchmark is offered here — compare against your own trend.