Free inventory turnover calculator: turns, days of inventory and carrying cost

Enter your own numbers, click the button and read the result. These tools give estimates for planning only. They use simplified formulas and the figures you enter, so check important decisions against your own data and advisers.

Inventory turnover compares what you sold, measured at cost, with the inventory you held to support it. Divide annual cost of goods sold by average inventory value to get turns per year, then divide 365 by turns to get days of inventory.

Carrying cost is what it costs to hold that inventory for a year. The calculator multiplies your average inventory value by a carrying cost rate that you enter, because the right rate depends on your cost of capital, storage, insurance, handling and obsolescence.

Worked example

This is an example only, using made-up round numbers to show the arithmetic. They are not benchmarks, and the results were produced by this page's calculator script.

Inputs: annual COGS 1,200,000, average inventory value 200,000, carrying cost rate 20% (an illustrative rate, not a benchmark).

Results:

• Inventory turns: 6.00 per year
• Days of inventory: 60.8 days
• Annual carrying cost: 40,000.00

This inventory turnover calculator is most useful when:

• You want a quick read on how fast stock moves and how many days of inventory you carry.
• You are comparing product lines, sites or years on the same basis.
• You are putting a cost on excess inventory to decide whether to reduce it.
• You are preparing for a conversation about working capital with finance or a lender.

If the numbers point to a bigger question, such as which suppliers, inventory policies or logistics routes to change, our supply chain consulting can help you work through it.

What is inventory turnover?

Inventory turnover shows how many times you sell through your average inventory in a year. It is calculated as annual cost of goods sold divided by average inventory value.

How do I calculate days of inventory?

Divide 365 by your inventory turns. For example, 6 turns a year means about 61 days of inventory on hand.

What is a good inventory turnover ratio?

It depends on your industry, product mix and service goals, so there is no single right answer. A useful comparison is your own trend over time, or similar products and sites within your business.

How do I estimate my carrying cost rate?

Add up what it costs you to hold inventory, such as cost of capital, storage, insurance, handling, shrinkage and obsolescence, and express it as a percentage of inventory value per year. Your finance team can help you pick a rate.

Should I use sales or cost of goods sold?

Use cost of goods sold, because inventory is valued at cost. Using sales would overstate turns because sales include your margin.

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