A store with $240,000 in annual cost of goods sold and an average inventory valued at $48,000 has a turnover ratio of 5. That means stock cycles five times a year, or roughly 73 days of inventory sitting on the shelf before it sells.
Inventory turnover ratio calculator
Measure your e-commerce store's inventory efficiency with our free calculator. Input your COGS and inventory values to find your Inventory Turnover Ratio and Average Days of Inventory on Hand.
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Example and tips
- For most DTC brands, a ratio of 4 to 6 is healthy. Under 2 means cash is frozen in slow stock.
- A ratio above 10 looks efficient but often signals stockouts. Check lost-sale reports before celebrating it.
- Compute turnover per SKU, not store-wide. The average hides the dead stock you should be discounting now.
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How it works
Measure your e-commerce store's inventory efficiency with our free calculator. Input your COGS and inventory values to find your Inventory Turnover Ratio and Average Days of Inventory on Hand.
- 1
1) Input your financial data
Provide your total Cost of Goods Sold (COGS) for a period, along with the value of your inventory at the beginning and end of that same period.
- 2
2) Let the tool do the math
Our calculator instantly computes your average inventory value and then uses it to determine your inventory turnover ratio for the period.
- 3
3) Understand your inventory health
Get your turnover ratio and the average number of days it takes to sell your stock. Use this insight to optimize your purchasing and sales strategy.
Frequently asked questions
What is the Inventory Turnover Ratio?
The Inventory Turnover Ratio is a key financial metric that measures how many times your business sells and replaces its entire stock of inventory over a specific period (usually a year). It's a crucial indicator of how efficiently you are managing your inventory and generating sales from it.
How do I use this calculator?
You need three key figures from your accounting records for a specific period (e.g., the last 12 months): - Cost of Goods Sold (COGS): The total direct cost of all the products you sold during that period. - Beginning Inventory Value: The total value of your inventory at the start of the period. - Ending Inventory Value: The total value of your inventory at the end of the period.
What is a "good" Inventory Turnover Ratio?
A "good" ratio varies significantly by industry. - High Ratio (e.g., 8x or more): Often seen in businesses with fast-selling, low-margin items like fast fashion or groceries. It indicates strong sales but can risk stockouts if not managed carefully. - Low Ratio (e.g., 2x - 4x): Common for businesses with high-margin, slow-moving items like luxury furniture or jewelry. It can also indicate overstocking or weak sales, which ties up cash. The goal is to find the right balance for your specific business.
What are "Days of Inventory on Hand"?
This is a more intuitive way to understand your turnover ratio. It tells you the average number of days it takes to sell your entire inventory. For example, 90 days of inventory means you have enough stock to last for three months at your current sales pace. This metric is excellent for cash flow planning.
Why is this important for my Shopify store?
Managing inventory turnover is critical for your store's financial health. A low turnover means your cash is tied up in unsold products sitting on a shelf, incurring storage costs and risking obsolescence. A healthy turnover ensures strong cash flow, reduces waste, and helps you respond more quickly to market trends.