Inventory turnover calculator
Stock is money parked on a shelf. Turnover shows how long it sits there on average.
Cost of goods = the purchase cost of the goods sold (not sales revenue). The simplest way to get average inventory is the average of the opening and closing stock of the year; more precisely, the average of month-end balances.
How is turnover calculated?
Turnover = annual cost of goods ÷ average inventory
Days of inventory = 365 ÷ turnover
Example: an annual cost of goods of 180,000 € and average stock of 45,000 € gives a turnover of 4 - the stock sells through four times a year and the average product sits on the shelf for 91 days. If turnover rose to 5 at the same sales level, only 36,000 € would need to be held in stock - 9,000 € would come back off the shelf into working capital.
Why does this number affect your wallet?
- Standing stock earns no value - and with seasonal goods and electronics it loses value: a new model arrives and the old one ends up being sold off at a discount. See also the discount calculator.
- Money tied up in stock is either borrowed money or a purchase you could not make - the same sum could buy in goods that move faster.
- Compare yourself with yourself. Categories differ too much to be guided by someone else's average - track how your own turnover changes month by month and by product group: the gap between fast movers and slow movers is usually wider than gut feeling suggests.
The fastest cure for standing stock is the right price at the right moment.
Look360 shows the price competitors sell the same goods at - so you know whether your standing stock is a price problem or a demand problem. Start with the free health check.