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· 4 min read
How to Measure How Fast Your Stock Sells
Manesh Jayawardhana
CIO & Co-founder
“We turn stock about six times a year.” Fine — but six turns means nothing on its own, and the number people quote is frequently calculated from revenue rather than cost, which inflates it by the entire gross margin.
The version of this metric that changes decisions isn’t the ratio at all. It’s the days figure, because days can be compared against something concrete: how long your supplier takes to deliver.
What turnover and DSI measure
Inventory turnover is how many times average inventory is sold and replaced during a period.
turnover = cost of goods sold ÷ average inventory
Days sales of inventory converts that into a duration.
DSI = 365 ÷ turnover
With 480,000 of COGS and average inventory of 80,000, turnover is 6.0 and DSI is 61 days — stock sits about two months before selling.
Two details matter. Use cost of goods sold, not revenue: inventory is carried at cost, and mixing the two bases overstates turnover by your margin. And use average inventory rather than the closing figure, because a single point-in-time value is distorted by whatever happened to arrive that week.
Why people get stuck here
- Revenue instead of COGS. Produces a flattering number that can’t be compared with anyone else’s.
- Closing rather than average inventory. A large delivery just before period end halves the apparent turnover.
- Cross-industry comparison. A grocer turns stock dozens of times a year; a jeweller two or three. The numbers aren’t comparable.
- Aggregate figures hiding the problem. Healthy overall turnover can conceal a category that hasn’t moved in a year.
What good inventory measurement looks like
DSI compared against lead time
If stock lasts 61 days and your supplier takes 45 to deliver, you have 16 days of genuine buffer. If lead time is 70 days, you’re structurally guaranteed to run out. This comparison is the whole reason to compute DSI.
Calculated per category, not just overall
The aggregate is a summary. Slow-moving lines and dead stock only appear when you break it down, and they’re where the working capital is trapped.
Trended against your own history
Your figure from a year ago is a far better benchmark than an industry average, because it holds everything else about your business constant.
| Metric | Formula | Tells You |
|---|---|---|
| Turnover | COGS ÷ average inventory | Times replaced per year |
| DSI | 365 ÷ turnover | Days stock sits |
| Buffer | DSI − lead time | Whether reordering can keep up |
Common mistakes to avoid
- Using revenue in the numerator, which inflates turnover by the gross margin.
- Treating high turnover as automatically good — frequent stockouts are lost sales, not efficiency.
- Comparing your figure against a different sector’s benchmark.
- Ignoring seasonality, which makes a single period’s figure unrepresentative.
- Calculating only in aggregate, so dead stock stays invisible.
How to do it with Inventory Turnover Calculator
The Inventory Turnover Calculator reports both the ratio and the days figure, with nothing stored.
- Enter cost of goods sold for the period — not revenue.
- Add opening and closing inventory so the average is used.
- Read turnover and DSI together.
- Compare DSI against your supplier lead time; if stock cover is shorter, stockouts are inevitable.
- Repeat by category to find the lines that aren’t moving.
Other business calculators are in the tools directory.
Frequently asked questions
Is high turnover always good?
No. Very high turnover with frequent stockouts means lost sales. The useful comparison is against your lead time and your own history, not a universal target.
Why use COGS rather than sales?
Because inventory is valued at cost. Dividing sales by inventory-at-cost mixes two bases and overstates turnover by your entire gross margin, making the figure incomparable with anyone else’s.
What’s a normal turnover figure?
It varies enormously by sector — grocery is measured in dozens of turns, luxury goods in low single digits. Only compare within your own industry, and preferably against your own past.
Final thought
Compute the days, not just the ratio. Days can be held against a supplier’s lead time, and that comparison is what tells you whether your stock levels actually work.