The Inventory Turnover Formula
Inventory turnover measures how efficiently you convert stock into sales. A ratio of 6 means you sell and replace your entire inventory six times per year roughly every two months.
Inventory Turnover = COGS ÷ Average Inventory
Average Inventory = (Beginning Inventory + Ending Inventory) ÷ 2
Calculate your turnover ratio
Inventory turnover ratio
6.00x
Times per year you sell and replace your entire inventory.
Worked example
A retailer with COGS of €600,000 and average inventory of €100,000 has a turnover ratio of 6. That means inventory sits for about 60 days on average (365 ÷ 6). Days Sales of Inventory (DSI) is the companion metric: DSI = 365 ÷ Turnover.
Industry benchmarks
| Industry | Typical turnover |
|---|---|
| Grocery / perishables | 14–20x |
| Fashion retail | 4–6x |
| Manufacturing | 4–8x |
| Wholesale distribution | 6–12x |
| E-commerce | 8–12x |
Benefits of a higher turnover ratio
Improve cash flow
Higher turnover means faster cash conversion, freeing up capital for growth and operations.
Reduce carrying costs
Faster turnover reduces storage, insurance, and obsolescence costs associated with holding inventory.
Prevent overstock
Monitoring turnover ratios helps identify slow-moving items before they become dead stock.
How to improve inventory turnover
- Optimize reorder points based on sales velocity and lead times
- Implement just-in-time ordering to reduce excess inventory
- Use demand forecasting to predict future sales accurately
- Identify and clear slow-moving stock through promotions
- Run ABC analysis to focus on high-value, fast-moving items
- Leverage inventory management software for automated reorder points
See all key formulas in our inventory formulas guide or learn how COGS feeds into turnover calculations. Use the inventory turnover calculator to plug in your own numbers, or see days sales of inventory for the same metric expressed in days.
Formula: Inventory Turnover = Cost of Goods Sold ÷ Average Inventory.
Higher turnover means stock moves faster freeing cash and reducing storage costs.
Retail averages 5–10x/year; manufacturing 4–8x. Compare within your industry, not across it.
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