AVAILABLE FOR WEB, FLUTTER & QA PROJECTS
How to use this tool
1. Enter Cost of Goods Sold (COGS)
Input the total direct cost of products sold during your chosen reporting period.
2. Input Beginning & Ending Inventory
Enter starting and closing inventory values at cost to compute Average Inventory.
3. Choose Measurement Period
Select Annual (365 days), Quarterly (90 days), or Monthly (30 days).
4. Review Velocity & Holding Metrics
Analyze Inventory Turnover Ratio, Days Sales of Inventory (DSI), and industry benchmark rating.
Formula or logic used
Inventory Turnover & Days to Sell Formulas
Stock turnover measures how many times a business sells and replaces its inventory over a specific operating timeframe.
Average Inventory ($): $\text{Avg Inventory} = \frac{\text{Beginning Inventory} + \text{Ending Inventory}}{2}$Inventory Turnover Ratio: $\text{Turnover Ratio} = \frac{\text{Cost of Goods Sold (COGS)}}{\text{Average Inventory}}$Days Sales of Inventory (DSI / DIO): $\text{DSI} = (\frac{\text{Average Inventory}}{\text{COGS}}) \times \text{Days in Period}$Holding Cost Estimate: $\text{Annual Holding Cost} \approx \text{Average Inventory} \times 25\%$ (insurance, storage, shrinkage)
Examples
Example 1: Fast-Fashion Apparel Retailer
Indicates excellent inventory velocity with stock turning over every two months.
Example 2: Industrial Machinery Parts Distributor
Common for slow-moving specialty goods, but signals that capital is locked up for over 8 months.
Common use cases
Dead Stock & Liquidation Identification
Identify slow-turning SKUs that tie up warehouse space and should be discounted or phased out.
Working Capital Optimization
Free up business cash flow by aligning purchasing volumes directly with real customer sell-through rates.
Supply Chain Benchmark Analysis
Compare your retail store's inventory efficiency against standard industry averages (e.g. grocery 14x vs luxury 2x).
Warehouse Storage Expansion Planning
Forecast future shelving and square footage requirements based on projected inventory turns.
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Frequently asked questions
What is a good inventory turnover ratio?
For most retail and e-commerce businesses, a turnover ratio between 4.0 and 8.0 (meaning inventory turns over every 45 to 90 days) is considered healthy. Grocery stores often achieve 12x-20x, while luxury jewelry averages 1x-2x.
What does Days Sales of Inventory (DSI) indicate?
DSI (also called Days Inventory Outstanding or DIO) tells you the average number of days it takes for your company to convert inventory into completed sales.
Why should COGS be used instead of Sales Revenue?
Inventory on balance sheets is recorded at cost, not retail price. Using Sales Revenue would artificially inflate the turnover ratio because retail price includes profit margin.
What are the risks of a turnover ratio that is too high?
While high turnover generally implies efficient sales, an excessively high ratio can indicate under-stocking, frequent stockouts, lost sales opportunities, and customer frustration.
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