Inventory turnover

Inventory turnover is how many times you sell your average stock in a period, calculated as cost of goods sold divided by average inventory value at cost.

By Berend Vrakking, founder of Product Metrics. Updated 7 October 2026.

Formula

Inventory turnover = cost of goods sold ÷ average inventory value at cost

Average inventory = (stock value at the start + stock value at the end) ÷ 2, both at cost. For a year, days to sell your stock = 365 ÷ turnover. Some use revenue instead of cost of goods sold; that sets selling prices against stock at cost and makes the figure look higher.

Example

Worked example, one year, all values at cost
Product	Cost of goods sold ÷ average inventory	Turnover	Days to sell
Trail Runner	€60,000.00 ÷ €10,000.00	6.0	61 days
Winter Boot	€8,000.00 ÷ €16,000.00	0.5	730 days
Both products	€68,000.00 ÷ €26,000.00	2.6	140 days

A respectable 2.6 turns a year for the shop, made of one product that turns 6 times and one that turns half a time while sitting on the most money. Illustrative data.

For one product, and for an account

Turnover tells you how often the money sitting in a product’s stock comes back as sales. Work it out per product, or at least per category: a shop-wide ratio lets a fast product cover for a slow one that holds most of the stock value.

Two neighbours measure related things. Sell-through rate counts units sold against units available in a period, where turnover uses values at cost over a longer period, such as a year. GMROI divides gross margin in euros by the same average inventory at cost, which adds what each turn earns: a product can turn often and still earn little.

Inventory Insights in Product Metrics does not report turnover. It shows stock cover, reorder dates and slow stock with its reason, per product.

Common mistake

Averaging only the opening and closing stock of a seasonal product. If both dates fall outside the season, the average misses the peak and the turnover comes out too high, so average monthly stock values instead.

Questions

How do you calculate inventory turnover?

Divide the cost of goods sold in a period by the average inventory value at cost in that period. A product with €60,000.00 of cost of goods sold in a year and €10,000.00 of average inventory turns 6 times, which is 365 ÷ 6 = 61 days to sell its stock. Illustrative data.

What is a good inventory turnover ratio?

One that holds up against the product’s own history. Judge each product against its own earlier years, its season and how long a reorder takes: a product that turns often but keeps running out is understocked, and a slow product is fine if it earns a high margin and you accept the money it ties up. Look first at products whose turnover is far below the rest and which hold a lot of stock value.

What is the difference between inventory turnover and days of inventory?

Inventory turnover looks back: how many times the stock sold in a period. Days of inventory looks forward: how many days the stock on hand lasts at the recent selling rate. 365 ÷ turnover converts a yearly turnover into an average number of days.

Keep reading

Days of inventoryHow many days your current stock lasts at its recent selling rate.
Sell-through rateThe share of available units that sold in a period.
Slow-moving inventoryProducts whose stock turns far more slowly than the rest.
Cost of goods soldThe top half of the turnover formula.
Inventory InsightsSee stock cover, reorder dates and slow stock per product.
Dead stock inventory: how to find it and clear itWhat to do with stock that has stopped turning.