# Inventory Turnover Calculator

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Instructions:
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You can use our Inventory Turnover Calculator, by providing the Cost of Goods Sold \((COGS)\), the current inventory and the previous inventory in the form below:

## Inventory Turnover Calculator

More about the
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inventory turnover
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so you can better use the results provided by this solver.

The inventory turnover is the ratio between the cost of goods sold and the average inventory. This ratio is a measure of asset management, and it indicates the number many times a firm turns its inventory.

### How is inventory turnover calculated?

The inventory turnover is a financial ratio of efficiency, which is particularly useful when compared to that of other firms in the industry. It is computed using the following formula: \[ \text{Inventory Turnover} = \displaystyle \frac{\text{Cost of Goods Sold}}{\text{Average Inventory}}\]Observe that, and this is a point that often brings confusion, the formula uses the average inventory, and just the last inventory.

### What is the ideal inventory turnover ratio for a company?

The Inventory Turnover Ratio is a commonly used financial ratio to measure efficiency in asset management. You can find other financial ratio calculators in our site, such as our current ratio , quick ratio , and our inventory turnover calculator.

### More finance calculators

Observe that the Cost of Goods Sold are also used to compute the Days' Sales in Inventory , another useful efficiency ratio.

### What is an inventory turnover example?

**Question**: Assume that the cost of goods sold is $10,000, the current inventory is $1000 and the previous inventory is $1300.
Compute the inventory turnover based on these data.

Solution:

This is the information we have been provided with:

Cost of Goods Sold \(COGS\) = | \(\text{\textdollar}10000\) |

Current Inventory = | \(\text{\textdollar}1000\) |

Previous Inventory = | \(\text{\textdollar}1300\) |

Hence, the Inventory Turnover is computed using the following formula:

\[ \begin{array}{ccl} \text{Inventory Turnover} & = & \displaystyle \frac{\text{Cost of Goods Sold}}{\text{Average Inventory}} \\\\ \\\\ & = & \displaystyle \frac{\text{\textdollar}10000}{(\text{\textdollar}1000+\text{\textdollar}1300)/2} \\\\ \\\\ & = & \displaystyle \frac{\text{\textdollar}10000}{\text{\textdollar}1150} \\\\ \\\\ & = & 8.7 \end{array} \]Therefore, the inventory turnover is \(8.7\), for the given cost of goods sold of \(COGS = \text{\textdollar}10000\), current inventory of \(\text{\textdollar}1000\), and previous inventory of \(\text{\textdollar}1300\). This means that firm turns its inventory over \(8.7\) times.