Inventory Turnover Calculator

How to Calculate Inventory Turnover Rate

Calculating inventory rate can be done with the following variables:

1. Cost of goods sold


2. Beginning inventory balance


3. Ending inventory balance


4. Number of days your numbers are based on

• ITR = Inventory turnover rate


• COGS = Cost of goods sold


• AI = Average inventory

Understanding Your Results

Your inventory turnover rate result will be a number. This number represents how often inventory is sold and replaced over a specific period, typically a year. The higher this number is the more efficiently and quickly items are sold and replenished. If this number is on the lower-end, this means that there is slower movement and sales of products and can be a sign of a larger issue. Additionally, you will be shown your inventory days. Inventory days represents how many days, on average, it would take to sell the inventory. The higher this number is the worse it is. It would signify that it would take many days to sell out of the inventory means sales are low.

A good inventory turnover rate for businesses will depend on your specific business and operation. Often times it is generally said that a good turnover rate is between 5 and 10, meaning the inventory is sold every 1-2 months.

How to Use the Inventory Turnover Rate Tool

Calculating inventory turnover has never been more simple. With this tool you can easily find this out in a matter of minutes or less. The steps involved with using this tool includes:

1. Enter the cost of goods sold.


2. Enter the value of the beginning inventory.


3. Enter the value of the ending inventory.


4. Enter the number of days your numbers are based on. By default, we have 365 entered as most times this is the timeframe used for this type of calculation.


5. Hit the calculate button and instantly get your results.

Calculation Example

We want to find out inventory turnover rate to get a better understanding of our operation and how efficiently we are moving product. We can use this tool to help us get this value. To start, we will have to enter our situation's information. We will be reviewing a year timeframe. Our COGS is $550,000, the beginning inventory amount was $1,500,000 and the ending inventory amount was $1,000,000. We can now hit calculate and get an inventory turnover rate of 0.44 and an estimated inventory days of 830.