Inventory Turnover & DSI Calculator
Measure how efficiently your business manages inventory. Calculate how many times inventory is sold and replaced over a period, and how many days it takes to clear stock.
Inventory Calculator
Analyze your inventory turnover and days sales of inventory
How is it calculated?
Turnover = \frac{COGS}{Average\ Inventory} \quad | \quad DSI = \frac{365}{Turnover}Average Inventory is (Beginning + Ending) / 2. Turnover ratio tells you how many times you sold out inventory. Days Sales of Inventory (DSI) tells you how long it takes to turn inventory into sales.
Worked Examples
$50k Beginning | $40k Ending | $200k COGS
Average Inventory = ($50k + $40k)/2 = $45k. Turnover = $200k / $45k = 4.44 times. DSI = 365 / 4.44 = 82.1 days to sell.
Definitive Guide to Inventory Turnover and Days Sales of Inventory (DSI)
Why Inventory Efficiency Dictates Business Survival
Inventory represents tied-up capital. Cash that is sitting on shelves in the form of unsold goods cannot be used to pay salaries, invest in marketing, or expand operations. Measuring inventory efficiency is therefore one of the most critical operational metrics for any product-based business.
Two metrics dominate this analysis: Inventory Turnover Ratio and Days Sales of Inventory (DSI). Turnover measures how many times a business completely sells and replaces its inventory over a given period (usually a year). DSI inverts this metric to tell you, on average, how many days a product sits in your warehouse before being sold.
Optimizing the Supply Chain
A high inventory turnover ratio generally indicates strong sales and efficient stock management. However, if the ratio is excessively high, it might suggest inadequate stock levels, leading to stockouts and lost sales opportunities. Conversely, a low turnover ratio highlights overstocking, obsolescence, or declining demand.
To calculate these metrics, you first need to determine your Average Inventory ((Beginning + Ending) / 2). Then, divide your Cost of Goods Sold (COGS) by the Average Inventory to find your Turnover Ratio. Finally, divide 365 days by your Turnover Ratio to find your DSI.
Frequently Asked Questions
What is a good inventory turnover ratio?
How do I calculate Days Sales of Inventory (DSI)?
Why do we use Cost of Goods Sold (COGS) instead of Revenue?
Results are estimates and should not be considered financial advice.