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Four turns on a 90,000 average
Start the year with 80,000 of inventory and end with 100,000. Cost of goods sold for the year is 360,000. Leave the period at 365 days. Average inventory is 90,000. 360,000 ÷ 90,000 is 4 turns.
Beginning inventory: 25% lower
Change beginning inventory to 60,000 while keeping the other example values the same.
Beginning inventory: 25% higher
Change beginning inventory to 100,000 while keeping the other example values the same.
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Quick answer
What does the Inventory turnover calculate?
How many times does this cost of goods sold turn the average inventory? This calculator uses beginning inventory, ending inventory, cost of goods sold, and days in the period to estimate how often stock turns at cost immediately in your browser.
With the values currently entered, the result is 4× — inventory turns in the period. It also shows average inventory, days of inventory on hand, and cost of goods sold.
How to use the Inventory turnover
- Replace the example values with your own numbers.
- Review the result and supporting figures as they update automatically.
- Check the formula and assumptions before using the estimate for a decision.
Inputs used
- Beginning inventory
- Ending inventory
- Cost of goods sold
- Days in the period — entered in days
Inventory turnover formula
Average inventory = (beginning + ending) ÷ 2. Turnover = cost of goods sold ÷ average inventory. Days on hand = days in the period ÷ turnover.
Assumptions
- An SEC computation of ratios exhibit writes inventory turnover as total cost of sales divided by average inventory, and average inventory as beginning plus ending, divided by two.
- Cost of goods sold and inventory stay on the same cost basis. The period length is the day count you type, often 365 for a year.
Verify the inputs
Authoritative sources
These sources explain the definitions, factors, or rules behind this tool. Their geographic scope is shown because an official source for one country is not automatically valid somewhere else.
Writes the current ratio as current assets divided by current liabilities, and inventory turnover as total cost of sales divided by average inventory (beginning plus ending, divided by two).
What is an income statement?US Securities and Exchange CommissionScope: US financial-statement education; method is generalPlaces cost of goods sold under revenue and names the remainder gross profit. Cost of goods sold is the cost basis used in inventory turnover.
Glossary of Business Financial TermsUS Small Business AdministrationScope: US small-business financial-statement termsDefines current assets, current liabilities, working capital, Days Receivable, Days Payable, GPM%, and break-even analysis from fixed cost, variable cost, and profit.
Sources do not endorse Calculum. Check the source date, scope, and your own documents before making a financial, tax, insurance, or reporting decision.
Practical guide
Inventory turnover example and edge cases
Inventory turnover asks how many times cost of goods sold replaces the stock you carry. An SEC ratios exhibit writes it as cost of sales divided by average inventory. Average inventory is the beginning balance plus the ending balance, then divided by two.
Example: Four turns on a 90,000 average
Start the year with 80,000 of inventory and end with 100,000. Cost of goods sold for the year is 360,000. Leave the period at 365 days. Average inventory is 90,000. 360,000 ÷ 90,000 is 4 turns.
- Beginning inventory
- 80,000
- Ending inventory
- 100,000
- Cost of goods sold
- 360,000
- Days in the period
- 365 days
Calculated result4×inventory turns in the period
Four turns means a batch of stock sits about 91 days. If you want days of cover from today’s unit count, open the inventory days of supply calculator.
Example results use the default display profile. The calculator above follows your selected country and units.
How to read the result
- Read the turn count first. Then check days on hand. A higher turn with the same sales usually means less cash sitting on a shelf.
- Keep cost of goods sold and inventory on the same cost basis. Selling price does not belong in this ratio.
Edge cases worth checking
The shop is seasonal
A year-end snapshot can hide a busy season. If stock peaked in July, use a mid-year count as well, or shorten the day count to that season.
You typed retail value as inventory
Stop and switch to cost. The SEC line uses cost of sales. A retail inventory number inflates the denominator and understates turns.
What changes the result most
Beginning inventory
Use a current amount for beginning inventory. Include fees or recurring costs that belong in the same figure.
Ending inventory
Use a current amount for ending inventory. Include fees or recurring costs that belong in the same figure.
Cost of goods sold
Use a current amount for cost of goods sold. Include fees or recurring costs that belong in the same figure.
Try a different scenario
Small changes show whether the answer is stable or sensitive.
Beginning inventory: 25% lower
60,0004.5×inventory turns in the period
Beginning inventory: 25% higher
100,0003.6×inventory turns in the period
Ending inventory: 25% higher
125,0003.51×inventory turns in the period
Common mistakes
Check beginning inventory
An SEC computation of ratios exhibit writes inventory turnover as total cost of sales divided by average inventory, and average inventory as beginning plus ending, divided by two. Make sure this matches the number you enter.
Keep days in the period consistent
Cost of goods sold and inventory stay on the same cost basis. The period length is the day count you type, often 365 for a year. Use the same units and time period throughout the calculation.
Do not rely on one inventory turnover scenario
Run a cautious case and an optimistic case. The range is often more useful than one exact-looking number.
Use this result well
How many times does this cost of goods sold turn the average inventory?
It does not replace a quote, contract, accountant, or local employment guidance.