Discover how efficiently your business converts inventory into sales
Turnover Ratio
Click to try common business scenarios:
Fast Fashion
High turnover business
Electronics Store
Medium turnover business
Luxury Goods
Lower turnover, higher margins
An inventory turnover calculator is a powerful tool that shows you how quickly your business sells and replaces its stock. It's like a speedometer for your inventory – telling you whether your products are flying off the shelves or gathering dust. This calculator takes your cost of goods sold and average inventory value to give you insights that can transform how you manage your stock and cash flow.
Think of inventory turnover as your business's pulse – it tells you if your inventory management is healthy or if there are problems brewing. A good turnover rate means you're efficiently converting stock into sales, which frees up cash for growth and reduces storage costs. Poor turnover might signal overordering, slow-moving products, or pricing issues that need immediate attention.
The formula is surprisingly simple: divide your Cost of Goods Sold (COGS) by your average inventory value. For example, if you sold $120,000 worth of products and kept an average of $30,000 in inventory, your turnover ratio is 4. This means you completely sold and restocked your inventory 4 times during the period. Our calculator does this math instantly and shows you what it means for your business!
While it varies by industry, most healthy e-commerce businesses aim for a turnover ratio between 4-12 times per year. Fast-moving consumer goods might see 15+ turns, while luxury items might only turn 2-3 times. The key is knowing what's normal for your industry and using an inventory turnover calculator to track your performance over time.
There are several strategies to boost your turnover: optimize your product mix by focusing on bestsellers, improve demand forecasting to avoid overstocking, implement just-in-time ordering, run targeted promotions for slow movers, or adjust pricing strategies. An inventory turnover calculator helps you measure the impact of these changes and find what works best for your business.
Days in inventory (also called Days Sales Outstanding) tells you how many days it takes, on average, to sell your entire inventory. It's calculated by dividing 365 by your turnover ratio. If your turnover ratio is 6, your days in inventory is about 61 days. This metric helps you understand your cash conversion cycle and plan purchasing decisions more effectively.
Absolutely! Low turnover often signals overstocking, poor demand forecasting, or products that aren't resonating with customers. It ties up cash that could be used for growth, increases storage costs, and raises the risk of obsolete inventory. Use your inventory turnover calculator regularly to spot these issues early and take corrective action before they hurt your bottom line.