Inventory Turnover Calculator
How many times a year do I cycle through my stock?
Your numbers
Result
Inventory turnover
—
How this is calculated
Inventory turnover measures how efficiently capital moves through stock. Turn it too slowly and cash is trapped in a warehouse; turn it too fast and you are probably stocking out and losing sales.
- Average inventory = (beginning inventory + ending inventory) ÷ 2
- Inventory turnover = annual cost of goods sold ÷ average inventory
- Days inventory outstanding = 365 ÷ inventory turnover
- Annual carrying cost = average inventory × carrying cost rate
What to make of the number
Most ecommerce operations sit between 4 and 8 turns a year, meaning 45 to 90 days of stock on hand. Below 3 turns, carrying cost — typically 20–30% of inventory value annually — starts to consume a meaningful share of gross margin.
Frequently asked questions
What is a good inventory turnover ratio?
For ecommerce, roughly 4 to 8 times a year. Much lower and cash is trapped; much higher and you are likely under-stocking and losing sales. The right figure depends on lead times and how seasonal your products are.
Why use average inventory rather than ending inventory?
Because ending inventory may be unrepresentative — especially for seasonal businesses, where it can be at a peak or a trough. Averaging the opening and closing figures smooths that out.
What is included in carrying cost?
Warehouse and storage fees, insurance, the cost of the capital tied up, shrinkage and obsolescence. For ecommerce it typically runs 20–30% of inventory value per year, which is why slow-moving stock is more expensive than it appears.
How do I improve turnover?
Reduce order quantities and reorder more often, clear slow sellers before they age, and shorten supplier lead times. Faster replenishment is the underlying fix — smaller, more frequent orders turn stock faster without increasing stockout risk.
Is high turnover always good?
No. Very high turnover can mean you are consistently under-stocked, which shows up as lost sales and, on marketplaces, as lost organic rank. Look at turnover together with stockout frequency.