How to Calculate the Stock Turnover Rate – Cost Calculator

Stock Turnover Rate Calculator

Measure how efficiently your business manages and sells its inventory over a specific period.

Cost of Goods Sold (COGS) ($)

Beginning Inventory ($)

Ending Inventory ($)

Calculation Results

Stock Turnover Ratio: –

Average Inventory Value: –

Average Days to Sell Inventory: –

Understanding Stock Turnover Rate

The Stock Turnover Rate (also known as Inventory Turnover Ratio) is a critical efficiency metric that tells a business how many times it has sold and replaced its inventory during a specific period. A higher turnover generally indicates strong sales or effective inventory management, while a low turnover may signal overstocking, obsolescence, or deficiencies in the product line or marketing effort.

The Stock Turnover Formula

To calculate the stock turnover rate, you need two primary components: the Cost of Goods Sold (COGS) and the Average Inventory. The math follows these steps:

Calculate Average Inventory: (Beginning Inventory + Ending Inventory) / 2
Calculate Turnover Ratio: Cost of Goods Sold / Average Inventory
Calculate Days Sales of Inventory (DSI): 365 / Turnover Ratio

Why This Metric Matters

Monitoring your turnover rate is essential for supply chain optimization. It helps businesses avoid "dead stock"—inventory that sits on shelves and incurs holding costs without generating revenue. Retailers, wholesalers, and manufacturers use this data to determine which products are moving quickly and which are tying up valuable capital.

Practical Example

Suppose a boutique clothing store has the following figures for the fiscal year:

Cost of Goods Sold (COGS): $200,000
Beginning Inventory: $40,000
Ending Inventory: $60,000

Step 1: Average Inventory = ($40,000 + $60,000) / 2 = $50,000.
Step 2: Turnover Ratio = $200,000 / $50,000 = 4.0.
Step 3: Days to Sell = 365 / 4 = 91.25 days.

This means the store clears its entire inventory four times a year, or roughly every 91 days.

What is a "Good" Turnover Rate?

A "good" rate depends heavily on the industry. A grocery store selling perishable items will have a much higher turnover (potentially 15-20+) compared to a luxury car dealership or a high-end jewelry store, which might have a turnover of 1 or 2. Always benchmark your results against industry averages to gauge performance accurately.