Inventory Turnover & Days Sales Calculator
Inventory turnover counts how many times you sold through your average inventory in a year. Days sales of inventory is the same idea expressed in days. Both are diagnostic — too low means dead stock, too high means missed sales.
The formulas
If you turn inventory 6 times per year, your DSI is 365 / 6 ≈ 61 days — meaning, on average, a unit of inventory sits on your shelves for 61 days before being sold. Some industries have huge variation: grocery turns 15-25 times (DSI 15-24 days), apparel 4-6 times (60-90 days), heavy industrial equipment 1-3 times (120-365 days).
Why turns matter
Inventory ties up cash. Every dollar of average inventory at cost is a dollar that isn't earning interest, isn't paying down debt, and isn't funding growth. The carrying cost of inventory — including capital, storage, insurance, shrinkage, and obsolescence — typically runs 20-30% of the inventory value annually for retail and consumer goods. Doubling turns from 4 to 8 cuts working capital tied up in inventory in half and saves the corresponding holding costs.
The other side: too high turnover
Excessively high turnover means stockouts. If you turn 30× a year and competitors turn 15×, you might be running so lean that customers regularly find empty shelves. Lost sales don't show up on the income statement — only the missing revenue does, and it's usually invisible. Pair turnover targets with stockout rate or fill rate metrics to balance.
Worked example
A consumer electronics retailer has $48M in annual COGS and an average inventory of $6M at cost. Turnover: 8.0×. DSI: 45.6 days. At a 25% annual holding cost, the inventory carries $1.5M per year in non-product costs. Cutting average inventory to $4M (turnover 12×) would save $500K in annual holding cost — but only if it doesn't lose more than $500K in stockout-related sales.
What this doesn't account for
- SKU mix. A blended turnover figure can hide A-class items turning 50× and dead stock turning 0.5×. Always look by category.
- Seasonality. Average inventory using only year-end snapshots distorts seasonal businesses; use monthly averages where possible.
- Consignment and dropship. Both models change who owns inventory; turnover is meaningful only for owned stock.
- Quality of inventory. A unit of finished goods is not equivalent to a unit of raw materials in terms of risk. Aged, obsolete, or write-down-eligible inventory inflates the denominator without representing real selling power.