Inventory Turnover Calculator
Turnover ratio, days on hand, and carrying cost. Model how a higher target turnover rate could free cash and cut holding expense.
100% client-side. Inventory and COGS figures never leave this browser.
Turnover, days on hand, holding cost, and cash you might free by hitting a higher target turnover rate.
Inventory turnover
4.0x| 91 days on hand
Industry guide: E-commerce 6-12x (benchmarks vary by sub-category).
Turnover ratio
4.00x
Days on hand
91.3 days
Annual holding cost
$15,000
Holding cost per day
$41.10
Cash flow impact (what-if)
Reaching 9x turnover frees about $33,333 in cash and saves about $8,333/year in holding costs.
Cash freed (one-time)
$33,333.33
Annual holding savings
$8,333.33
Inventory at target
$26,666.67
Current vs target inventory (cash tied up)
Total inventory cost sold in the period.
(Beginning + ending inventory) / 2.
Storage, insurance, obsolescence, financing; often 20-30%.
How this calculator works
Inventory turnover measures how many times you sell through your average inventory balance in a year. Formula: Turnover = Cost of Goods Sold ÷ Average Inventory Value. Average inventory is typically (beginning inventory + ending inventory) ÷ 2. Days on hand converts turnover to a time unit: Days on Hand = 365 ÷ Turnover. Holding cost estimates the annual cost of carrying that inventory: Holding Cost = Average Inventory × Carrying Cost %. The carrying cost percentage captures storage, insurance, capital opportunity cost, and shrinkage, and typically ranges from 20–30% of inventory value in e-commerce. The what-if section shows how inventory and cash change at a higher target turnover rate: Target Average Inventory = COGS ÷ Target Turnover, and Cash Freed = Current Average Inventory − Target Average Inventory. Key assumption: COGS, not revenue, is the correct numerator; using revenue inflates the ratio by the margin percentage. Edge case: seasonal businesses have naturally asymmetric inventory levels throughout the year; using a single average from beginning and ending balances can misrepresent actual turnover — a 12-month average of monthly snapshots is more accurate.
Worked lens
At $240,000 COGS and $60,000 average inventory, turnover is 4x (about 91 days on hand). If you lift turnover toward 9x (a common e-commerce midpoint), average inventory drops to about $26,667, freeing roughly $33,333 in cash and cutting annual holding cost by about $8,333 at a 25% carry rate.
Frequently asked questions
What is inventory turnover?
Inventory turnover measures how many times you sell and replace your full stock over a year. Higher turnover generally means less cash sitting idle in the warehouse, lower holding costs, and fresher product on shelves. Very high turnover, though, can signal stockout risk if your replenishment lead times cannot keep pace with demand.
What is a good inventory turnover ratio?
It depends on your category. E-commerce often lands around 6 to 12 times per year. Grocery can run 12 to 20 times. Apparel and electronics often sit in the 4 to 10 times band. Compare your ratio against your own sub-category benchmarks rather than a broad industry average, since margins and lead times vary widely.
What is the holding cost of inventory?
Holding cost is the total annual expense of keeping stock on hand. It includes warehouse or storage fees, insurance, financing or opportunity cost on tied-up capital, shrinkage, and obsolescence write-offs. Many operators use 20 to 30 percent of average inventory value as a planning estimate when precise figures are not available from their accounting system.
How do I improve inventory turnover?
Order smaller batches more frequently to reduce average stock levels, cut or discontinue slow-moving SKUs that tie up capital, tighten demand forecasts with rolling sales data, and clear aged stock through promotions or bundles before carrying costs compound. Better supplier lead times also allow you to hold less safety stock without increasing stockout risk.
What is days of inventory on hand?
Days of inventory on hand tells you how long your current stock would last at your normal sales pace before running out, assuming no new receipts arrive. Divide 365 by your turnover ratio to get the number. A business turning stock 12 times per year holds roughly 30 days of cover on average at any given moment.