Cash Conversion Calculator

Cash Conversion Calculator: calculate cash conversion for your business. Formula, benchmarks, and practical tips included.

Inventory turnover measures how many times a business sells and replaces its stock over a given period. High turnover indicates efficient inventory management and strong sales; low turnover suggests overstocking, slow-moving goods, or weak demand — all of which tie up working capital and risk obsolescence. Days inventory outstanding (DIO) — the inverse measure — shows the average number of days stock is held before being sold. Profit Margin Calculator and Markup Calculator are key companions for working capital analysis.

Enter cost of goods sold (COGS) for the period.
Enter average inventory value: (opening stock + closing stock) ÷ 2.
Inventory turnover = COGS ÷ Average inventory.
Days inventory outstanding (DIO) = 365 ÷ Inventory turnover.
Compare against industry benchmarks and historical trends.

Inventory turnover formula

Inventory turnover = COGS ÷ Average inventory

Days inventory outstanding (DIO) = 365 ÷ Inventory turnover

Worked example: Annual COGS 4,800,000. Opening inventory 600,000, closing inventory 400,000. Average inventory = 500,000. Turnover = 4,800,000/500,000 = 9.6×. DIO = 365/9.6 = 38 days. Stock is sold and replaced every 38 days on average.

Inventory turnover benchmarks

Industry averages

Typical inventory turnover by sector: grocery/food retail 15–30× (very perishable, daily restocking); fast fashion 4–8×; electronics retail 5–10×; automotive parts 3–6×; industrial equipment 2–4×; luxury goods 1–3×. High turnover is not always better — excessively lean inventory risks stockouts and lost sales. The optimal turnover minimises carrying costs while maintaining service levels.

Business tips and best practices

Calculate by SKU or product category — aggregate turnover masks individual slow-movers that tie up disproportionate capital.
Track DIO alongside days payable outstanding (DPO) — if you pay suppliers in 30 days but hold stock for 45 days, you are financing 15 days of inventory from your own cash.
Seasonal businesses should use monthly or quarterly turnover calculations rather than annual, as annual averages smooth out critical peak and trough dynamics.

Amazon's inventory turnover is approximately 8–10× per year, with DIO around 40–45 days — efficient for the breadth of its catalogue.
A 10-day reduction in DIO on 500,000 of inventory at a 6% cost of capital saves approximately 8,200 per year in carrying costs — purely from faster stock turnover.

Common mistakes to avoid

Using revenue instead of COGS — inventory is valued at cost, not selling price; using revenue inflates the turnover ratio artificially.
Using period-end rather than average inventory — year-end inventory may be artificially low (post-holiday for retailers) or high (pre-season); averaging opening and closing is more representative.

Inventory valuation methods (FIFO, LIFO, weighted average) are prescribed by applicable accounting standards and affect both the COGS figure and the inventory balance. LIFO is not permitted under IFRS. For statutory financial reporting, use the inventory accounting method required by the standards applicable in your jurisdiction.