Calculate your inventory turnover ratio and days inventory outstanding (DIO). Understand how quickly your business sells and replaces its inventory to optimize stock levels.
Annual COGS
Inventory Turnover Ratio
5.00x
Days Inventory Outstanding
73.0 days
Average Inventory
$60,000.00
Good turnover — inventory is managed efficiently.
Inventory Cycles / Year
5.0
times stock is fully replaced
Avg Days to Sell
73
days inventory sits before sale
Daily COGS Rate
$822
cost of goods consumed daily
Low (15%) Holding Cost
Minimal storage, stable goods
$9,000/yr
$750/month on avg inventory of $60,000
Typical (25%) Holding Cost
Average warehousing + insurance
$15,000/yr
$1,250/month on avg inventory of $60,000
Low Cost
Basic storage, low-risk items
$9,000
annual @ 15%
Save ~$1,800 with faster turns
Typical Cost
Standard warehouse + insurance
$15,000
annual @ 25%
Save ~$3,000 with faster turns
High Cost
Climate control, high security
$21,000
annual @ 35%
Save ~$4,200 with faster turns
Insight: Increasing your turnover ratio from 5.0x to 6.3x could reduce your average inventory by 20%, saving approximately $3,000/year in carrying costs.
Storage Utilization
Room for improvement
Efficiency Score
Moderate efficiency
Fast Movers
50%
of inventory
Slow Movers
30%
of inventory
Dead Stock
20%
of inventory
Inventory turnover is a crucial efficiency metric that reveals how well a business manages its stock. A high turnover ratio means the company is selling goods quickly, reducing storage costs and the risk of obsolescence. A low ratio may signal overstocking, weak sales, or poor product-market fit. Tracking this metric over time helps businesses optimize purchasing decisions, reduce carrying costs, and improve cash flow.
Inventory turnover measures how many times a company sells and replaces its inventory during a period. It's calculated by dividing the cost of goods sold by average inventory. A higher ratio generally indicates efficient inventory management.
DIO is the average number of days inventory sits before being sold. It's calculated as 365 divided by the inventory turnover ratio. Lower DIO means faster inventory movement and less capital tied up in stock.
COGS is used because inventory is recorded at cost, not selling price. Using revenue would inflate the ratio since it includes the markup. COGS provides a more accurate comparison between what's being sold and what's being held.
It varies widely by industry. Grocery stores may have turnover of 14+, while furniture stores may be around 4-6. Compare your ratio against industry peers for a meaningful benchmark.
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