Method and assumptions
Use inventory measured at cost when COGS is the numerator. Mixing retail-value inventory with cost-of-goods sold produces an inconsistent turnover ratio.
Average inventory = (beginning + ending inventory) / 2. Turnover = COGS / average inventory. GMROI = gross profit / average inventory.
Worked scenario
Enter beginning and ending inventory at cost, period COGS and gross profit. Review turnover, days held and GMROI together. Run the calculation by category or SKU group as well as for the total business, because a healthy average can hide slow and unproductive stock.
How to interpret the result
COGS and inventory must use a consistent cost basis. Turnover describes how often average inventory is consumed by sales cost, while GMROI connects gross profit with inventory investment. Neither metric alone measures availability, service level or markdown risk.
Input reference
- Currency
- Example default: USD
- Cost of goods sold in period
- Example default: 120000
- Beginning inventory at cost
- Example default: 30000
- Ending inventory at cost
- Example default: 40000
- Gross profit in period
- Example default: 60000
- Days in reporting period
- Example default: 365
Common mistakes
- Mixing retail-value inventory with cost-based COGS.
- Using two point balances during a highly seasonal period.
- Improving turnover through stockouts that lose contribution.
Before using the result
- Use average inventory that represents the period.
- Segment slow stock instead of relying on the total average.
- Review turnover with GMROI, service and markdowns.
Questions to check before deciding
Should inventory be measured at retail price?
Not when using COGS. Use cost-basis inventory for a consistent ratio.
Can a very high turnover be harmful?
Very high turnover can indicate understocking and lost sales, so review service level and stockouts as well.
Independent calculator. Not affiliated with or endorsed by the platforms mentioned.