Inventory turnover: Measuring Inventory Turnover on a Cost Basis
Inventory turnover compares cost of goods sold with average inventory. Both figures should use compatible cost definitions so the ratio is not inflated by using sales revenue.
Use the Inventory turnover Calculator to enter your own figures and compare the result with the worked example below.
Inventory turnover formula
Inventory turnover = Cost of goods sold ÷ Average inventory
Worked example
| Item | Example value |
|---|---|
| Cost of goods sold | 100000 USD |
| Average inventory | 20000 USD |
| Inventory turnover | 5 |
These are illustrative inputs, not current prices, rates or recommended targets. Where a currency is shown, keep all comparable money amounts in the same currency; conversion examples identify the two sides separately.
How to interpret the result
High turnover can reflect efficiency or inadequate stock. Review stockouts, seasonality and margins before drawing a conclusion.
Related calculations
Method and further reading
The example follows the FinMathly calculator method. For broader background, see SEC: Understanding financial statements. The background resource may use jurisdiction-specific terms; it does not replace the assumptions of this calculator.
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