What is inventory turnover?
Inventory turnover is the ratio that shows how many times your stock is sold out and replaced with new stock in a period. Its formula is: cost of goods sold ÷ average inventory value. A business that sells 2.400.000 ₺ worth of goods a year and carries an average of 400.000 ₺ of stock has a turnover of 6; that is, its stock turns over six times a year. To convert this into days, divide 365 by the turnover: 365 ÷ 6 ≈ 61 days — meaning a product is sold on average two months after it goes on the shelf.
What turnover really tells you is about money: every box in the warehouse is cash tied up until it is sold. When turnover rises, you make the same sales with less money; when it falls, your money sits on the shelf.
The two parts of the formula
Cost of goods sold (numerator). What the products you sold during the period cost you. It is not sales revenue — mixing the two inflates turnover by your profit margin.
Average inventory value (denominator). The average cost value of the stock held in the warehouse during the period. In its simplest form it is the average of the opening and closing values: (opening stock + closing stock) ÷ 2.
As long as both are in terms of cost, the result is consistent. If you take one at selling price and the other at cost, the number you get tells you nothing.
Calculate it in four steps
1. Choose the period and find the cost of goods sold
The calculation is done for a time span; the most common is one year. Add up what the products you sold in that period cost you — not the selling price, but the purchase cost. If your annual cost of goods sold is 2.400.000 ₺, that is the numerator. If you want to look at it quarterly, you can shorten the period; just compare the result with periods of the same length when you interpret it.
2. Calculate the average inventory value
The stock value on a single day is misleading: the warehouse before a count and after a promotion look nothing alike. Take the average of the opening and closing stock values. If the opening value is 380.000 ₺ and the closing value is 420.000 ₺, the average stock is (380.000 + 420.000) ÷ 2 = 400.000 ₺. If you record monthly stock values, the average of twelve months gives a more accurate result.
3. Divide: inventory turnover
Divide the cost of goods sold by the average inventory value: 2.400.000 ÷ 400.000 = 6. This number tells you that the stock in your warehouse sold out and was replaced six times in a year. It has no unit; it is a multiple, read as “turned over 6 times”.
4. Convert to days and interpret
The multiple stays abstract, days are concrete: 365 ÷ turnover. 365 ÷ 6 = about 61 days — that is, a product is sold on average two months after it goes on your shelf. This is how many days, on average, it takes for the money you tied up in stock to come back to you. Make comparisons against your own past periods; an industry average only gives a rough idea.
Converting turnover into days
The multiple is good for comparing businesses, but days make daily decisions easier:
Days of inventory = 365 ÷ inventory turnover
In a warehouse with a turnover of 6, a product waits 61 days on average. If turnover rises to 12, the wait drops to 30 days — meaning the same revenue turns over with half the stock. This number also lets you see the gap between the day you pay your supplier and the day you collect from your customer.
Example calculations by industry
The same turnover is not good or bad in every industry; what decides it is how fast the product is consumed:
| Product group | Annual cost of goods sold | Average stock | Turnover | Days of inventory |
|---|---|---|---|---|
| Food, fast-moving consumer goods | 1.800.000 ₺ | 100.000 ₺ | 18 | 20 days |
| Stationery, general retail | 900.000 ₺ | 150.000 ₺ | 6 | 61 days |
| Furniture, white goods | 1.200.000 ₺ | 400.000 ₺ | 3 | 122 days |
| Spare parts | 600.000 ₺ | 300.000 ₺ | 2 | 183 days |
In the table, spare parts turn over at about one-ninth the rate of food; this is not a failure, it is the nature of the business. A part that is rarely requested but must be on hand when it is requested sits on the shelf for a long time. Compare your figure not with the industry average but with your own figure from the previous period.
Three places to look when turnover falls
1. Dead stock. Items that have seen no movement for months keep dragging the average down. Pull a list from the movement history by last sale date; this is usually the job that improves turnover the most. We explain how to produce the list and how to clear goods sitting on the shelf in the what is dead stock guide.
2. A reorder level set too high. When the reorder threshold is set above where it should be, the warehouse never runs down. Recalculate the threshold with your real sales rate and real lead time — we walk through the formula step by step in the what is a reorder level guide.
3. Incorrect stock records. If the quantity in the system does not reflect reality, the denominator is wrong too, and the resulting turnover is not real. The only way to see whether the records match the shelf is to count; the how to do a warehouse count guide explains the steps.
What the three have in common is that turnover is an outcome: what really determines the number is how much of which product you order, and when. We explain how to make those decisions by grouping products by value (ABC analysis) in the what is inventory management guide.
Making the calculation sustainable
Calculating turnover once a year gives you an idea, but it does not drive decisions. The useful version is to look by product group and at regular intervals. For a one-off calculation you can use the free inventory turnover calculator. For continuous tracking, what you need is for the cost of goods sold and the stock value to accumulate on their own: the app records the cost and the remaining stock with every sale and produces the profit-and-loss and stock reports from them. To work on your phone in the warehouse, the mobile and web versions share the same data.
Turnover is a measure to look at after warehouse stock tracking is set up: if product codes are orderly, movements are recorded and counts are done, you can trust the number you get.
Frequently asked questions
Does the calculation use sales revenue or cost?
Cost. Because the denominator (average inventory) is held at cost value, the numerator must be cost too. If you divide revenue by cost, your profit margin gets mixed into the calculation and turnover comes out higher than it really is; this is the most common mistake. There is also a formula that uses revenue, but then you have to value the inventory at selling price as well.
What should inventory turnover be?
There is no single right value; it varies by industry and type of product. Common ranges are 15-20 a year in food, 4-8 in stationery and general retail, and 2-4 in spare parts and furniture. The meaningful comparison is with your own history: if it was 4 last year and is 6 this year, you are making the same sales with less stock.
Can it be calculated for a single product?
Yes, and that is in fact the most useful version. For a single product you can use quantities instead of amounts: units sold in the period ÷ average units in stock. When you look product by product, it becomes clear which item in your warehouse is tying up money; the overall turnover hides this.
What should I do if turnover is low?
First separate out the cause: did demand fall, was too much ordered, or is the product range wider than it needs to be? Reducing the order quantity of slow-moving items, clearing the stock on hand with promotions or bundles, and lowering the reorder level of those products all help. You also need to weed out dead stock that sees no movement at all — those items keep dragging the average down.
Is very high turnover a good thing?
Up to a point. High turnover means high sales with little stock and is good for cash; but when it gets too high it can be a sign that you often run out of stock. Read turnover together with the number of stockouts: if lost sales rise as turnover rises, your stock level is lower than it should be.
How does it relate to the reorder level?
The two answer different questions. The reorder level answers “when should I order” and looks at the lead time of a single product. Turnover answers “how much stock am I carrying” and looks at the whole period. When turnover falls, the place to look is usually the reorder levels: if a level is set too high, the warehouse stays full all the time.
Last updated: 2026-09-22
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