Inventory Turnover Calculator — Days on Hand
Inventory turnover and days of inventory from cost of goods sold and average stock
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The purchase cost of what you sold in the same period, not the sales amount.
The inventory value you held on average during the period.
Use 365 (366 in a leap year) for a year, about 90 for a quarter, about 30 for a month.
Inventory turnover result
Enter the cost of goods sold and the average inventory to get the turnover and the days of inventory.
A higher turnover means stock sells faster and fewer days of inventory means less money tied up in stock. A good level depends on the industry and the product, so no benchmark is built in. With zero cost of goods sold the days of inventory are not calculated. An average of two points in time can differ from the true average in a seasonal business.
What it is
The more stock you keep, the more money is tied up, and storage costs and the risk of write-offs grow. Too little, and you lose sales to stock-outs. This inventory turnover calculator takes the cost of goods sold and the average inventory for a period and tells you how many times the stock was sold through (turnover) and how many days it takes on average to sell it (days of inventory). When you do not know the average, enter the opening and closing stock and it uses their average. The period can be a year, a quarter or a month. Everything is calculated in your browser.
How to use
- Enter the cost of goods sold for the products sold in the period.
- Enter the average inventory, or choose the start and end of period mode and enter both values.
- Check the days in the period. The default is 365, 366 for a leap year and about 90 for a quarter.
- Read the average inventory, the turnover and the days of inventory.
- Check the formulas below to see how it was calculated.
How it works
- Average inventory = total of the stock values ÷ number of values. A direct entry is used as it is, and opening and closing stock are averaged.
- Inventory turnover (times) = cost of goods sold ÷ average inventory.
- Days of inventory = days in the period ÷ turnover = average inventory × days ÷ cost of goods sold.
- The average is not rounded beforehand and is kept as an exact fraction.
- With zero cost of goods sold the turnover is 0 and the days of inventory are not calculated.
- The average inventory must be above 0 and the period is a whole number from 1 to 366 days.
Example
Yearly cost of goods sold 600,000,000, average inventory 100,000,000 and 365 days.
| Item | Calculation | Result |
|---|---|---|
| Inventory turnover | 600,000,000 ÷ 100,000,000 | 6 times |
| Days of inventory | 365 ÷ 6 | 60.8 days |
| Seen as a quarter (90 days) | 90 ÷ 6 | 15 days |
Entering an opening stock of 80,000,000 and a closing stock of 120,000,000 averages to 100,000,000 and gives the same result.
Common mistakes
Entering sales instead of the cost of goods sold inflates the turnover. Use an amount on the same cost basis as the stock. Mismatched periods are another common slip: entering one month of cost of goods sold while leaving the days at 365 makes the days of inventory twelve times too long. Match the two periods. An average of just two points can also differ from the true average if you build up stock at year end.
FAQ
How is inventory turnover calculated?
Inventory turnover = cost of goods sold ÷ average inventory. With a yearly cost of goods sold of 600,000,000 and an average inventory of 100,000,000, the stock sold through 6 times in the year. A higher turnover means stock sells faster.
What are the days of inventory?
The average number of days it takes to sell the stock. Days of inventory = days in the period ÷ turnover. With 6 turns on a 365-day basis that is about 60.8 days. The fewer days, the less money is tied up in stock.
How do I get the average inventory?
The most accurate way is to average every month-end stock value. This tool lets you enter the average directly, or the opening and closing stock and it averages the two. If the closing stock is empty, only the opening stock is used.
Can I use sales instead of cost of goods sold?
That is not recommended. Inventory is valued at cost, so it should be divided into cost of goods sold. Using sales makes the turnover look higher than it really is.
What is a good turnover?
It depends on the industry and the product, so no benchmark is built in. Compare with your own earlier periods or similar businesses. For a seasonal product, use a longer period.
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