How to calculate inventory turnover
Inventory turnover is cost of goods sold divided by average inventory. Divide the days in the period by turnover to get days inventory outstanding.
Skip the maths and use the inventory turnover calculator
The formula
Turnover = COGS ÷ ((beginning inventory + ending inventory) ÷ 2); DIO = days in period ÷ turnover.
Step by step
- Take COGS for the period.
- Average beginning and ending inventory at cost.
- Divide COGS by the average.
Worked example
COGS 600,000; inventory 100,000 → 140,000
- Average inventory = (100,000 + 140,000) ÷ 2 = 120,000
- Turnover = 600,000 ÷ 120,000 = 5.0
- DIO = 365 ÷ 5 = 73 days
Inventory turned 5 times, about 73 days on hand.
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Cite this page
Free Calculator. (n.d.). How to calculate inventory turnover. https://freecalculator.tech/guides/how-to-calculate-inventory-turnover
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