Inventory Turnover Ratio Calculator
Calculating inventory turnover ratio is crucial for understanding your business’s liquidity and efficiency. Even when inventory is zero, you can still calculate this ratio to gain valuable insights. Let’s dive in!
- Enter the Cost of Goods Sold (COGS) for your business.
- Enter the average inventory value for your business.
- Click ‘Calculate’ to see your inventory turnover ratio and a visual representation.
The formula for inventory turnover ratio is Cost of Goods Sold / Average Inventory. Here’s how it works:
| Business | COGS | Average Inventory | Inventory Turnover Ratio |
|---|---|---|---|
| ABC Corp | $500,000 | $100,000 | 5 |
| XYZ Inc | $300,000 | $60,000 | 5 |
| Industry | Average Inventory Turnover Ratio |
|---|---|
| Retail | 4-6 |
| Manufacturing | 3-5 |
- Higher inventory turnover ratios indicate faster inventory sales and lower carrying costs.
- Regularly review and adjust your inventory management strategy to optimize this ratio.
What does a high inventory turnover ratio mean?
It means your business sells inventory quickly, reducing the risk of obsolete or unsold stock.
How often should I calculate inventory turnover ratio?
At least quarterly, or more frequently if your inventory levels fluctuate significantly.
BLS.gov – Inventory turnover ratios by industry
Census.gov – Inventory turnover ratio methodology