Measure Your Business Efficiency Instantly
Welcome to Calculator Budy. Managing inventory is one of the most critical aspects of running a successful product-based business. Whether you run a retail store, an e-commerce site, or a warehouse, knowing how fast your products are selling is the key to maintaining healthy cash flow.
Our Inventory Turnover Calculator helps you instantly determine your inventory turnover ratio and the average days it takes to sell your stock. By inputting just a few financial figures, you can gain deep insights into your business's operational efficiency.
How to Use This Calculator
Using this tool is straightforward. You will need three numbers from your balance sheet or income statement:
- Cost of Goods Sold (COGS): The direct cost of producing the goods sold by a company. This includes materials and labor but excludes indirect expenses like marketing.
- Beginning Inventory: The dollar value of your stock at the start of your selected period (e.g., January 1st).
- Ending Inventory: The dollar value of your stock at the end of that same period (e.g., January 31st).
The Inventory Turnover Formula
For transparency, here is the math our tool uses. This is the standard accounting formula used by financial analysts worldwide.
1. Average Inventory
First, we account for fluctuations in stock levels:
2. Turnover Ratio
Next, we determine how many times you sold your stock:
3. Days Sales of Inventory (DSI)
Finally, we calculate how many days it takes to clear your stock:
Interpreting Your Results
What counts as a "good" ratio depends heavily on your industry:
- High Turnover (10+): Common in grocery and perishable goods sectors. It means you sell goods very quickly.
- Low Turnover (Under 4): Common in high-ticket industries like luxury cars or heavy machinery.
Note: A ratio that is too high might mean you are understocking and missing out on sales. A ratio that is too low usually indicates overstocking, which ties up your cash and increases storage costs.
Frequently Asked Questions
Why use COGS instead of Sales?
We use Cost of Goods Sold (COGS) because inventory is valued at cost on your balance sheet. If we used Sales (which includes profit markup), the calculation would be inaccurate and inflated.
Can I use this for monthly calculations?
Yes. However, the "Days to Sell" result in this calculator assumes a 365-day year. If you are calculating for a specific month manually, simply divide the number of days in that month by your turnover ratio.