Enter cost of goods sold and average inventory to find your turnover ratio and how many days it takes to sell through your stock.
Inventory turnover measures how many times a business sells and replaces its stock over a period. It is a core efficiency metric for retailers, wholesalers, and manufacturers, revealing whether inventory is moving briskly or sitting on shelves tying up cash.
The ratio is Cost of Goods Sold ÷ Average Inventory. If your COGS for the year was $500,000 and your average inventory was $100,000, turnover is 5 — you cycled through your inventory five times. Using COGS (rather than revenue) keeps both figures on a cost basis for an accurate comparison.
Turnover is easier to interpret as days. Days Inventory Outstanding (DIO) = Period Days ÷ Turnover. A turnover of 5 over 365 days means inventory sits about 73 days on average before selling. Lower DIO means you convert stock to cash faster, freeing up working capital.
Tip: Higher turnover is usually better, but too high can signal understocking and lost sales from items being out of stock. The ideal rate depends on your industry — perishable goods should turn far faster than furniture or jewelry.
Slow-moving inventory ties up cash, risks obsolescence, and adds storage cost. Fast turnover improves cash flow and reduces markdown risk, but must be balanced against stockout risk and bulk-purchase savings. Track turnover by product line to spot both your winners and the dead stock worth clearing.