function calculateTurnover() {
var cogs = parseFloat(document.getElementById('cogsInput').value);
var begInv = parseFloat(document.getElementById('begInvInput').value);
var endInv = parseFloat(document.getElementById('endInvInput').value);
var resultsArea = document.getElementById('resultsArea');
if (isNaN(cogs) || isNaN(begInv) || isNaN(endInv)) {
alert("Please enter valid numbers for all fields.");
return;
}
if (cogs < 0 || begInv < 0 || endInv < 0) {
alert("Values cannot be negative.");
return;
}
// Calculate Average Inventory
var avgInv = (begInv + endInv) / 2;
if (avgInv === 0) {
alert("Average inventory cannot be zero.");
return;
}
// Calculate Turnover Ratio
var turnoverRatio = cogs / avgInv;
// Calculate Days Sales of Inventory (DSI)
// 365 days / Turnover Ratio
var dsi = 0;
if (turnoverRatio !== 0) {
dsi = 365 / turnoverRatio;
}
// Formatting results
document.getElementById('resAvgInv').innerHTML = "$" + avgInv.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resTurnoverRate').innerHTML = turnoverRatio.toFixed(2) + " times/year";
document.getElementById('resDSI').innerHTML = dsi.toFixed(1) + " days";
resultsArea.style.display = "block";
}
How to Calculate Sales Turnover Rate
Understanding Sales Turnover Rate (commonly referred to in inventory management as Inventory Turnover Ratio) is crucial for any business that deals with physical goods. It measures the efficiency with which a company manages its stock and converts inventory into sales.
A high turnover rate generally indicates strong sales and effective inventory management, while a low rate may suggest overstocking, obsolescence, or deficiencies in the product line or marketing effort.
The Sales Turnover Formula
The standard method to calculate this rate involves two main steps: determining your average inventory and then comparing it to the Cost of Goods Sold (COGS).
Inventory Turnover Rate = Cost of Goods Sold / Average Inventory
Where:
Cost of Goods Sold (COGS): The direct costs attributable to the production of the goods sold in a company.
Average Inventory: The mean value of inventory during a specific period. It smooths out seasonal fluctuations.
Average Inventory = (Beginning Inventory + Ending Inventory) / 2
Step-by-Step Calculation Example
Let's look at a realistic retail scenario to see how the numbers work: