Inventory Turnover Ratio Calculator
Cost of goods sold, opening stock and closing stock — and how many times the stock turned over, and how many days it sits on the shelf.
Result
- Average inventory
- ₹20,00,000.00
- Inventory turnover ratio
- 6.00 times
- Days of inventory
- 61 days
The stock turned over 6.0 times — on average an item waits about 61 days before it is used or sold.
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Quick answer
Inventory turnover ratio = Cost of goods sold ÷ Average inventory, where average inventory = (Opening stock + Closing stock) ÷ 2. A ratio of 6 means the stock is replaced six times a year, or held about 61 days (365 ÷ 6).
| Formula | Cost of goods sold ÷ average inventory |
|---|---|
| Average inventory | (Opening + closing stock) ÷ 2 |
| Days of inventory | 365 ÷ turnover ratio |
| Cost | Free — no sign-up, runs in your browser |
The inventory turnover ratio — also called the stock turnover ratio — tells you how many times the stock you hold is used up and replaced in a period. It is the quickest single check on whether money is moving through the store or sitting on its racks.
Turn it around and it becomes days of inventory: how long the average rupee of stock waits before it is issued or sold. A factory turning stock 4 times a year holds about three months of material; one turning it 12 times holds about a month.
The formula
- Average inventory
(Opening stock + Closing stock) ÷ 2- Inventory turnover ratio
Cost of goods sold ÷ Average inventory- Days of inventory
365 ÷ Inventory turnover ratio
A worked example
A unit's cost of goods sold for the year is ₹1.2 crore. Stock was ₹18 lakh on 1 April and ₹22 lakh on 31 March, so average inventory is ₹20 lakh. Turnover is 1,20,00,000 ÷ 20,00,000 = 6 times, and days of inventory is 365 ÷ 6 ≈ 61 days.
Use cost of goods sold, not sales. Sales include margin and stock is valued at cost, so dividing sales by stock overstates the ratio — the most common mistake with this formula.
What a good inventory turnover rate looks like
There is no single right number. Job shops and engineering units with long, made-to-order jobs commonly turn raw material 3 to 6 times a year; process plants and FMCG-style manufacturers run far higher. Compare the ratio with your own past years and with similar businesses, not with a retail chain.
A falling ratio means stock is growing faster than consumption — slow-moving or dead items, over-buying, or work in progress piling up. A very high ratio can mean the opposite problem: so little stock that production stops whenever a supplier is late.
Calculate it per item, not only for the whole store
A healthy overall ratio can hide a handful of items that have not moved for a year. Running the same formula item by item — or using a stock ageing report — shows which items are blocking the cash. An ERP that values stock and records every issue can give the ratio and ageing per item without a spreadsheet.
Questions people ask.
What is the inventory turnover ratio formula?
Inventory turnover ratio = Cost of goods sold ÷ Average inventory. Average inventory is (opening stock + closing stock) ÷ 2 for the same period.
Is stock turnover ratio the same as inventory turnover ratio?
Yes. Stock turnover ratio, inventory turnover ratio and inventory turnover rate all mean the same thing: how many times the stock is used and replaced in a period.
How do I convert inventory turnover into days?
Divide the days in the period by the ratio. For a year, days of inventory = 365 ÷ inventory turnover ratio; a ratio of 8 is about 46 days.
Should I use sales or cost of goods sold?
Cost of goods sold. Stock is valued at cost, so dividing sales (which include margin) by stock gives an inflated ratio.
What is a good inventory turnover ratio for a manufacturer?
It depends on the industry. Make-to-order engineering units often run 3–6 times a year on raw material; continuous process plants run higher. A ratio that falls year after year is the warning sign.
What does a low inventory turnover ratio mean?
Too much stock for the level of consumption — slow-moving or obsolete items, over-buying, or excess work in progress. It ties up working capital and storage space.
Related free tools
See all free toolsDoing this for every item, every day?
A calculator is the right tool once. When it is every item in the store, it belongs in the system that already knows the numbers.