The Inventory Turnover Formula

This inventory turnover ratio calculator divides annual cost of goods sold by average inventory — the midpoint of beginning and ending balances. The result, expressed as a multiple, tells you how many times the business cycles through its stock in a year.

Days Sales of Inventory

Dividing 365 by the turnover ratio gives DSI — the average number of days inventory sits before being sold. Pairing the two metrics shows both the velocity of sales and the cash conversion timeline.

What a Healthy Ratio Looks Like

High turnover signals efficient selling and lean inventory; extremely high values may mean stockouts and lost sales. Low turnover suggests overstocking or weak demand. Always benchmark against your industry and your own historical trend.