Inventory Turnover Ratio Calculator
The Inventory Turnover Ratio measures how many times a business sells and replaces its entire stock of inventory over a year. It measures inventory velocity, demand health, and warehouse holding efficiency.
Sensitivity Analysis
Evaluate how variations in key operational drivers impact Inventory Turnover Ratio.
| Sensitivity Case | Assumption Shift | Driver Value | Inventory Turnover Ratio | Impact vs Base |
|---|
Formula & Methodology
Inventory Turnover = Cost of Goods Sold (COGS) / Average InventoryCOGSTotal direct cost of goods sold over the annual period.
Average Inventory(Beginning Inventory + Ending Inventory) / 2.
Practical Worked Example
Nordic Apparel incurs $2,400,000 in COGS with an average inventory holding of $400,000.
Interpretation & Industry Benchmarks
Higher inventory turnover reduces storage, insurance, and spoilage costs while freeing up operating cash flow.
Typical for luxury jewelry, heavy equipment, furniture.
Standard for apparel, consumer electronics, hardware.
Grocery, fast food, perishable FMCG.
Industry Nuance: Supermarkets turn inventory 15x–25x (15-24 days), whereas luxury watchmakers turn inventory 1.0x–2.0x (180-365 days).
Analytical Limitations
- Using Revenue instead of COGS in the numerator will artificially inflate turnover.
Frequently Asked Questions
Why use COGS instead of Sales for inventory turnover?
Inventory is recorded at cost on the balance sheet. Comparing Sales (which includes profit markup) against Inventory at cost distorts the calculation. COGS provides an accurate cost-to-cost ratio.