Inventory Turnover and Sell-Through Rate Calculator

Stock is cash in another form, and the longer it sits on a shelf the longer that cash is out of use. Inventory turnover measures how many times you sell and replace your average stock in a period, and the related days-to-sell figure says how long the average item waits. Sell-through, used by buyers of seasonal goods, shows how much of a delivery has gone. This page works out all three from a few numbers you already have.

Turnover

Cost of goods sold, the cost of the items you sold in the period, is divided by the average inventory, the average of the opening and closing stock values. Both must be at cost, not at selling price. A turnover of 4.62 means that you sold, and replaced, your average stock a little over four and a half times. The page also shows days to sell, the days in the period divided by the turnover, and the turnover scaled to a full year.

Sell-through

If you add units, the page also computes the sell-through rate: units sold divided by units available, where available means the units you started with plus those received during the period. It shows the units left, and the weeks of stock that remain at the selling pace of the period. This suits a season or a single delivery, where the question is how much has sold so far.

A worked example

The default is a shop with 600,000 of cost of goods sold over a year, opening inventory of 150,000 and closing inventory of 110,000. Average inventory is 130,000, turnover is 4.62 and the average item takes 79.1 days to sell. In units the shop started with 800, received 1,200 and sold 1,500, so 2,000 were available, the sell-through rate is 75.00% and 500 units are left, enough for 17.4 weeks at the year’s pace. The fashion sample covers a 120-day season: 84,000 of cost of goods sold, inventory falling from 60,000 to 22,000, and 1,500 units opening, 2,500 received and 3,100 sold. Average inventory is 41,000, turnover is 2.05 for the season (6.23 a year), the days to sell 58.6, the sell-through 77.50%, 900 units are left and about 5.0 weeks of stock remain.

Reading the results

Turnover is only meaningful against a comparison: your own figure last year, a similar shop or the industry. A fall in turnover means stock is building up, either from over-buying or slow sales. Days to sell turns the ratio into a number people can picture. The sell-through rate is most useful during a season, when it tells you whether a markdown is needed before the end.

Edge cases

If the average inventory is zero, the page cannot compute turnover and says so. The unit boxes are optional, but you need all three to get the sell-through section. If more units were sold than were available, it reports an error, since the inputs cannot be right. Days in the period must be above zero, so a quarter is 91 or 92 and a month about 30.

Limits

Using only the opening and closing values hides what happens in between: a business that is nearly empty in January and full in November has a very different average from two year-end figures. Where you have monthly values, average the twelve instead. The weeks of stock figure assumes the future pace equals the pace in the period, which can mislead near a peak or a sale.

Related tools

• Inventory Reorder Point and Safety Stock Calculator says when to buy more of a product that sells well.
• Economic Order Quantity (EOQ) Calculator chooses the size of each purchase.
• Profit Margin Calculator shows what each unit earns when it does sell.
• E-Commerce Profit Calculator adds the cost of unsold returns to the picture.