Inventory Turnover Calculator
Calculate inventory turnover ratio and days inventory outstanding.
Calculator
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Inventory turns: 6.25 times/year
Days inventory outstanding: 58 days
Formula
Inventory turnover = Cost of Goods Sold (COGS) / Average inventory value. Days inventory outstanding (DIO) = 365 / Inventory turnover.
Example calculation
Annual COGS ₹5 crore, average inventory ₹80 lakh: Turnover = 5,00,00,000 / 80,00,000 = 6.25 turns/year. DIO = 365 / 6.25 = 58.4 days.
Engineering notes
Higher turnover is generally better — it means less capital tied up in stock. But too high can signal stockouts and lost sales. Industry benchmarks vary widely: FMCG 10–15 turns, industrial manufacturing 4–8 turns, heavy engineering 2–4 turns. Compare with your industry peers rather than using a universal target.
When to use this calculator
- Working capital management — identify slow-moving inventory consuming cash that could be deployed elsewhere
- Warehouse optimisation — rank SKUs by turnover to allocate prime storage locations to fast movers
- Supplier negotiation — use DIO data to negotiate consignment stock or vendor-managed inventory for slow items
- Annual inventory review — identify obsolete or excess inventory for write-off or liquidation
- Financial reporting — calculate DIO as part of the cash conversion cycle for investor reporting
Frequently asked questions
- What is a good inventory turnover ratio for manufacturing?
- Benchmarks by sector: FMCG/consumer goods 10–20 turns. Automotive manufacturing 8–15 turns. General manufacturing 4–8 turns. Heavy engineering/capital goods 2–4 turns. Spare parts/MRO 1–3 turns. Higher turns mean better working capital efficiency but increase the risk of stockouts. Target the highest turnover consistent with your service level requirements.
- How is inventory turnover different from days inventory outstanding (DIO)?
- They measure the same thing from different angles. Inventory turnover (times/year) = COGS / Average inventory — how many times you sold and replaced your inventory in a year. DIO (days) = 365 / Turnover — average number of days inventory sits before it is sold. Both measure the same efficiency; DIO is more intuitive for operational management (days of stock on hand).
- What is the cash conversion cycle and where does inventory fit?
- Cash conversion cycle (CCC) = DIO + DSO − DPO, where DIO is days inventory outstanding, DSO is days sales outstanding (debtors), and DPO is days payable outstanding (creditors). CCC measures how long cash is tied up in the operating cycle. Reducing DIO (faster inventory turns) directly shortens CCC and improves cash flow. World-class manufacturers target CCC < 30 days; many Indian manufacturers run 60–90+ days.