Methodology: Inventory Turnover Calculator

1. Scope

Calculates inventory turnover (COGS / average inventory) and days inventory outstanding. It is a trailing indicator and does not forecast demand or recommend re-order points.

2. Inputs and outputs

Inputs

cogs number (currency)

Cost of goods sold for the period.
beginningInventory number (currency)
endingInventory number (currency)
periodDays number default: 365

Outputs

averageInventory

(beginning + ending) / 2.
turnover

cogs / averageInventory.
daysInventoryOutstanding

periodDays / turnover.

Engine source: src/lib/inventory-turnover-calculator/engine.ts

3. Formula / scoring logic

avg_inventory = (beginning + ending) / 2
turnover      = cogs / avg_inventory
dio           = period_days / turnover

4. Assumptions

Average inventory = simple mean of start and end. Monthly-average is more accurate but not requested.
COGS uses the same costing basis (FIFO, weighted average, or specific identification) as the inventory valuation.
No adjustment for obsolete or write-down inventory.

5. Data sources

US Census Bureau — Manufacturing and Trade Inventories and Sales (M3) as of 2024

6. Known limitations

Benchmarks differ sharply by industry. Grocers turn > 15× annually; high-end apparel may turn 3–4×.
Seasonality masks issues: Q1 inventory totals for a Q4-heavy retailer are misleadingly low.

7. Reproducibility

Input
cogs = $1,200,000, beginning = $150,000, ending = $200,000, period = 365.

Expected output
avg_inventory = $175,000, turnover ≈ 6.86×, dio ≈ 53 days.

8. Change log

2026-04-24 methodology page first published.