A bicycle shop divides its sales by its stock and gets 3.7 turns a year. The real number is 2.5. This inventory turnover calculator divides cost by cost, for each category — and shows how much stock you can free at your target turnover.
| Category | Cost of goods sold | Stock at the start | Stock at the end |
|---|
| Category | Average stock | Turns a year | Days on hand | Stock at the target | Stock to free |
|---|
The calculator runs in your browser. Nothing you type is sent anywhere. Yellow rows turn slower than the target.
Inventory turnover = cost of goods sold ÷ average stock at cost
Both numbers must be at cost. The stock is at cost; the sales price includes your markup. Divide sales by stock, and the turnover grows by the markup — the stock does not move any faster.
A bicycle shop sets a target: its stock must turn 4 times a year. At the end of the year the owner divides the sales by the average stock: 540,000 ÷ 145,000 = 3.7. Almost there.
But the sales are at the sales price, and the stock is at cost. The cost of goods sold is 360,000. Cost ÷ cost gives 2.5 turns: the stock waits 147 days, not 98.
Then the owner looks at each category:
| Category | Cost of goods sold | Average stock | Turns a year | Days on hand | Stock at 4 turns | Stock to free |
|---|---|---|---|---|---|---|
| Bikes | 240,000 | 100,000 | 2.4 | 152 | 60,000 | 40,000 |
| Parts | 60,000 | 12,000 | 5.0 | 73 | 15,000 | 0 |
| Accessories | 45,000 | 18,000 | 2.5 | 146 | 11,250 | 6,750 |
| Clothing | 15,000 | 15,000 | 1.0 | 365 | 3,750 | 11,250 |
| All categories | 360,000 | 145,000 | 2.5 | 147 | 90,000 | 58,000 |
The parts turn 5 times a year. They are better than the target. The total hid that.
The clothing turns once a year: the jerseys of last spring are still on the rail. It is a small category, but at 4 turns it needs 3,750 of stock, not 15,000.
The bikes free the most: 40,000. Two smaller orders in the season, in place of one large order before it, lower the average stock.
Divide cost by cost, and look at each category. Sales ÷ stock gives a number that looks good and is wrong by the markup.
One category per row: the cost of goods sold in B, the stock at the start in C and at the end in D. The months of the period in J1 and the target turnover in J2. Then:
=AVERAGE(C2:D2)=B2*12/$J$1/E2=365/F2=MAX(E2-B2*12/$J$1/$J$2,0)For the total, divide the sum of column B by the sum of column E. Do not take the average of column F: a small category that turns fast would pull the total up.
How many times a year you sell your stock and buy it again: cost of goods sold ÷ average stock at cost. A turnover of 4 means the average item waits about three months on the shelf.
Because the stock is at cost. Sales include your markup. With a markup of 50 %, sales ÷ stock gives a turnover 1.5 times too high — the number looks good and is wrong.
It depends on the goods. Fresh food turns many times a month; furniture a few times a year. Compare each category with itself, month by month, and set a target for each category.
Days on hand = 365 ÷ turnover. It is the DIO of the cash conversion cycle: how many days your money waits in the stock before a sale.
No. A turnover that is too high means small, frequent orders and more stockouts. Check the margin too: the GMROI calculator shows the turns of each item and the gross profit they earn.
For steady stock, yes. For a seasonal business, the stock at the start and the end of the year is often at its lowest. Then use the average of the twelve month-end balances, or the turnover will look better than it is.
In Golden Inventory, the Profit and Loss report gives the cost of goods sold for any date range, on every plan. The Inventory Valuation report (Pro) gives the stock at cost of each item — run it on the first and the last day of the period. Start on the free plan, no card.