Calculate your inventory turnover ratio and days sales of inventory. Compare against industry benchmarks to optimize your stock management.
COGS = Cost of Goods Sold (annual)
Avg Inventory = Average Inventory Value over the period
DSI = Average days to sell through entire inventory
365 = Days in a year
Inventory Turnover Ratio
N/A
How many times inventory is sold and replaced per year
Days Sales of Inventory
N/A
Average days to sell through your inventory
Average Inventory Held
$0.00
Average value of inventory on hand
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A good inventory turnover ratio depends on your industry, but for ecommerce businesses, 4-6 turns per year is considered average. Ratios above 6 indicate efficient inventory management, while ratios below 2 suggest overstocking or slow-moving products.
Average inventory value is calculated by adding your beginning inventory value and ending inventory value for a period, then dividing by two. For example, if you started the year with $50,000 and ended with $70,000, your average inventory is $60,000.
Days Sales of Inventory (DSI) measures the average number of days it takes to sell through your entire inventory. It is calculated as 365 divided by your inventory turnover ratio. A lower DSI means you sell inventory faster.
A low turnover ratio often means you are holding too much stock relative to your sales. To improve it, consider running promotions on slow-moving items, improving demand forecasting, negotiating smaller and more frequent supplier orders, or discontinuing underperforming SKUs.
Inventory turnover and stock turnover are the same metric; both measure how many times your inventory is sold and replaced over a period. The terms are used interchangeably in accounting and supply chain management.