Inventory turnover measures how many times cost of sales used the average inventory balance during a period; days inventory converts that pace into average days held. Cost of sales of $360,000 and average inventory of $90,000 produce 4.00 turns per year and about 91.25 days of inventory using 365 divided by 4.00.
What inventory turnover vs days inventory means
Inventory turnover is cost of sales divided by average inventory for the period, while days inventory is the period days divided by inventory turnover. Turnover expresses pace per period; days inventory expresses the reciprocal pace as an average holding-time indicator.
| Cost of sales | $360,000 per year |
|---|---|
| Average inventory | $90,000 |
| Inventory turnover | 4.00 turns/year |
| Days inventory | 91.25 days |
| Period basis | 365 days |
Inventory turnover vs. days inventory: how are the two measures connected?: worked example
A retailer starts the year with $80,000 of inventory and ends with $100,000, so average inventory is $90,000. With $360,000 of annual cost of sales, turnover is 4.00: $360,000 divided by $90,000. Days inventory is 365 divided by 4.00, or 91.25 days. A 4.00-turn result does not mean a specific item waited exactly 91.25 days; it is an average based on period totals.
How to calculate inventory turnover vs days inventory
Average inventory = (beginning inventory plus ending inventory) divided by 2 for this simple two-point model. Inventory turnover = cost of sales divided by average inventory. Days inventory = 365 divided by annual turnover, or use the matching number of days for a shorter measured period.
Use the relevant inputs with these related Calculatort pages: inventory turnover calculator · cash burn context · profit margin calculation.
Common mistakes
Do not divide sales revenue by inventory when the chosen formula uses cost of sales, combine a monthly cost figure with annual inventory without annualizing, or compare seasonal businesses using different measurement dates.
Where this calculation stops
Physical counts, valuation method, obsolete stock, consignment, returns, seasonality, and the definition of cost of sales can change the measure. A faster turn is not automatically better if stockouts lose sales.
Source and verification
The U.S. Securities and Exchange Commission defines inventory turnover as cost of sales divided by average inventory for the period. Read the named source. Verify the source date and the controlling statement, agreement, payroll record, or accounting record before relying on the illustrated result.