Inventory Turnover Calculator

How this is calculated

The classic definition, no adjustments.

Use cost of goods sold, not revenue, so the numerator and denominator are both at cost. Average inventory should cover raw material, WIP, and finished goods, ideally averaged from several points across the year rather than one snapshot at year-end, when many shops deliberately run stock down.

Reading the number

• Higher turns mean less cash tied up. The same throughput on a smaller inventory base frees working capital for machines, people, or growth.
• There is no universal good number. A job shop with long-lead castings and a high-volume consumables line will, and should, turn at very different rates. Compare against your own history and close peers.
• Turns can be too high. If turns rise because you cut buffers you actually needed, stockouts and expediting eat the working-capital gain.
• Turns measure speed, not cost. Turnover tells you how fast inventory moves; it does not tell you what holding it costs in capital, space, insurance, and obsolescence. For that, use the inventory carrying cost calculator.

To decide how much stock you should hold in the first place, size order quantities with the EOQ calculator and buffers with the safety stock and reorder point calculator. Slow turns are often a flow problem, not a purchasing problem; the fundamentals are in our lean manufacturing guide.