Inventory turns
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Inventory Turnover Ratio Calculator
Turns and days on hand from COGS and average inventory.
Page updated 2026-09-14.
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Days on hand
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How many times inventory cycles through in a year
$540,000 in annual COGS against $90,000 in average inventory gives 6.00 turns per year -- inventory is sold and replaced six times annually. That converts to 60.83 days on hand, meaning a typical unit sits in inventory just over two months before selling.
Turnover and days-on-hand are two views of the same number: turns = COGS / average inventory, and days on hand = 365 / turns. Higher turns (lower days on hand) generally means more efficient inventory management and less cash tied up in unsold stock -- but too high can also mean stockout risk from ordering too conservatively.
What counts as a 'good' turnover ratio varies enormously by category: grocery and perishables often turn 15-20+ times a year, while furniture or heavy equipment might turn 2-4 times and still be considered healthy for that category.
Average inventory, not a single snapshot
COGS / average inventory. Industry norms differ by perishability. Average inventory should be calculated across the period (commonly (beginning + ending) / 2, or a rolling monthly average), not a single point-in-time count -- a business with seasonal inventory swings can get a misleading ratio from a snapshot at the wrong time of year.
This uses COGS, not revenue, in the numerator -- using sales revenue instead of COGS is a common mistake that inflates the ratio, since revenue includes markup that inventory cost doesn't.
The carrying cost of holding that average $90,000 in inventory for 60.83 days is a separate question -- see the Inventory Holding Cost Calculator to price it.
Related inventory and cash-cycle metrics
Inventory turnover is one leg of the cash conversion cycle -- pair it with the Accounts Receivable Turnover Calculator and a payables figure to see the full cycle from cash out to cash back in.
To set an actual reorder trigger based on this days-on-hand figure, the Inventory Reorder Point Calculator turns it into a specific stock level.
Frequently Asked Questions (FAQ)
How is the 6.00 turns figure calculated?
Inventory turns = annual COGS / average inventory = $540,000 / $90,000 = 6.00. It answers how many times the entire inventory balance was sold and replenished over the year.
How does 6 turns per year become 60.83 days on hand?
Days on hand = 365 / turns = 365 / 6 = 60.83 days -- roughly how long, on average, a unit sits in inventory before it's sold.
Should I use revenue or COGS in the calculation?
COGS / average inventory. Industry norms differ by perishability. Use COGS, not revenue. Revenue includes your markup, so using it instead of COGS overstates the turnover ratio and understates days on hand.
What counts as a healthy turnover ratio?
It depends entirely on the category. Grocery and perishable goods commonly turn 15+ times a year; big-ticket or seasonal items may turn only 2-4 times and still be normal for that industry. Compare against your specific category's benchmarks, not a universal number.
How should average inventory be calculated?
Commonly as (beginning inventory + ending inventory) / 2 for the period, or a rolling average across multiple months if inventory swings seasonally. A single snapshot value can distort the ratio if that month isn't representative.
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