Inventory turnover calculator
Enter a year's cost of goods sold and your inventory at the start and end of it. You'll see how many times you sold through stock and how long a unit sits.
Formula
Inventory turnover = cost of goods sold ÷ average inventory
Average inventory = (starting inventory + ending inventory) ÷ 2, both at cost. Days of inventory = 365 ÷ turnover.
How to calculate inventory turnover: a worked example
A store's cost of goods sold last year was $240,000. It held $70,000 of stock at cost at the start of the year and $50,000 at the end.
- Average inventory = ($70,000 + $50,000) ÷ 2 = $60,000
- Turnover = $240,000 ÷ $60,000 = 4.0 times a year
- Days of inventory = 365 ÷ 4.0 = 91 days
A unit sits on the shelf about three months before it sells.
What is a good inventory turnover?
Compare days of inventory with how long it takes to restock. If your supplier delivers in 45 days, holding 91 days of stock ties up cash in about 46 days of stock you don't need yet.
Faster isn't always better: turnover that's too high means stockouts and lost sales. Aim for days of inventory a little above your restock lead time, then check the products that sit longest. The table converts turnover to days.
| Turnover per year | Days of inventory |
|---|---|
| 2x | 183 |
| 3x | 122 |
| 4x | 91 |
| 6x | 61 |
| 8x | 46 |
| 12x | 30 |
Questions about inventory turnover
- Should I use cost of goods sold or revenue?
- Cost of goods sold. Inventory is valued at cost, so dividing revenue by it mixes prices with costs and overstates turnover. If you only have revenue, use it consistently and compare your store with itself over time.
- Can I calculate turnover for one product?
- Yes. Use the product's cost of goods sold and its average stock at cost. Product-level turnover is often more useful than the store total, because one slow product can hide behind a fast bestseller.
- How do I improve inventory turnover?
- Order smaller amounts more often, discount or bundle slow stock before it ages, and put your marketing behind the products you hold the most of. Each one turns stock into cash sooner.
Do it with Replo
Spot slow stock before it piles up
Replo reads your Shopify sales and inventory and lists the products that sell slowest.
Prompt: “which products sold slowest in the last 90 days?”