Inventory Turnover Calculator
Work out how many times your stock turns in a year, how many days the average item sits, and what that says about cash tied up in the warehouse. Inventory turnover is cost of goods sold divided by average stock; days inventory outstanding is 365 divided by that figure. Use COGS rather than revenue — revenue includes margin and stock is held at cost, so mixing the two inflates the ratio by your gross margin.
COGS, not revenue. Using revenue is the most common error and it inflates the ratio by your gross margin.
Annualised before the ratio is worked out, so the answer is comparable with the benchmarks below.
Average of the two is used. For a seasonal business, closing stock alone flatters the result.
Inventory turnover
AED 0
Enter your details to see the estimate.
| Breakdown | Value |
|---|---|
| Cost of goods sold | — |
| Average stock | — |
| Inventory turnover | — |
| Days inventory outstanding | — |
| Estimated holding cost per year | — |
| Cash released if you improved by one turn | — |
Assumptions
These are the rates the estimate uses. Change them to match your own operation.
Capital, storage, insurance, obsolescence and shrinkage.
Calculated in your browser. Your figures never reach our servers, and nothing you type here creates a record.
An estimate based on the figures you entered. Model your own numbers before committing to a decision.
The concept
What inventory turnover measures
Inventory turnover is the number of times a business sells and replaces its stock in a year. Days inventory outstanding is the same measurement expressed as time: how long the average item sits before it sells.
Together they answer the question every stock-holding business has and few can answer precisely: how much cash is sitting in the warehouse, and for how long?
Higher is generally better — less capital tied up, less obsolescence, less storage. But a ratio that is too high signals a different problem: stock-outs, lost sales, and buying in quantities too small to earn a supplier discount.
There is no universally good number. There is a good number for your sector, and a trend that should be moving in the right direction.
Show the working
The formula
average stock = (opening + closing) ÷ 2Or a single average figure, if that is all you have.turnover = COGS ÷ average stockTimes per year.DIO = 365 ÷ turnoverDays the average item sits.holding cost = average stock × 25%Capital, storage, insurance, obsolescence, shrinkage.Worked example. Annual COGS of AED 6,000,000, opening stock AED 1,600,000, closing stock AED 1,400,000. Average stock is AED 1,500,000. Turnover is 6,000,000 ÷ 1,500,000 = 4.0 times. DIO is 365 ÷ 4 = 91 days.
Turning five times instead of four would need average stock of AED 1,200,000 — releasing AED 300,000 of working capital without selling anything more.
The question everyone gets wrong
Use cost of goods sold, not revenue
This is the most common error in the calculation, and it produces a flattering number.
Revenue includes margin. Stock is valued at cost. Dividing revenue by stock compares two different bases, and it inflates the ratio by exactly your gross margin percentage.
| Method | On AED 8m revenue, AED 6m COGS, AED 1.5m stock |
|---|---|
| Revenue ÷ average stock | 5.3 times — wrong |
| COGS ÷ average stock | 4.0 times — correct |
At a 25% gross margin the revenue method overstates turnover by a third. A business benchmarking itself that way concludes it is efficient when it is average.
A second, smaller error: using closing stock instead of average stock. For a seasonal business — and most UAE retail and distribution is seasonal — closing stock at a low point makes turnover look far better than the year actually was.
Benchmarks
What good looks like
| Sector | Typical turnover | DIO |
|---|---|---|
| Grocery & FMCG | 12–20× | 18–30 days |
| Food service | 20–40× | 9–18 days |
| Fashion retail | 4–6× | 60–90 days |
| Electronics distribution | 6–10× | 36–60 days |
| Building materials | 4–8× | 45–90 days |
| Automotive parts | 3–5× | 73–120 days |
| Industrial equipment | 2–4× | 90–180 days |
| Pharmaceuticals | 6–10× | 36–60 days |
These are widely cited industry norms rather than a single authoritative source. Treat them as direction, not target.
A UAE-specific note. An importer holding stock against long lead times from Asia or Europe will show lower turnover than an equivalent business in a shorter-lead-time market. That is structural, not inefficiency. Compare against your own trend before comparing against a global benchmark.
Frequently asked questions
Inventory turnover questions
How do I calculate inventory turnover?
Divide cost of goods sold for the year by average stock, where average stock is opening plus closing divided by two. COGS of AED 6,000,000 against average stock of AED 1,500,000 is a turnover of 4.0 times.
Should I use revenue or cost of goods sold?
Cost of goods sold. Revenue includes your margin while stock is valued at cost, so using revenue inflates the ratio by exactly your gross margin percentage. At a 25% margin it overstates turnover by about a third.
What is a good inventory turnover ratio?
It depends entirely on the sector. Grocery and FMCG typically turn 12 to 20 times a year, fashion retail 4 to 6, and industrial equipment 2 to 4. Compare against your own trend first and the sector second.
What is days inventory outstanding?
The same measurement expressed as time: 365 divided by the turnover ratio. A turnover of 4.0 means the average item sits for 91 days. Operations teams generally act on the days figure rather than the ratio.
Why is my turnover lower than the industry average?
For a UAE importer it is often structural rather than inefficiency. Holding stock against long lead times from Asia or Europe shows lower turnover than an equivalent business in a shorter-lead-time market. Check your own trend before treating a benchmark as a target.
Can inventory turnover be too high?
Yes. A very high ratio can mean stock-outs, lost sales and buying in quantities too small to earn supplier discounts. The aim is the right level for your service commitments, not the highest possible number.
How do I improve inventory turnover?
Set reorder points from actual demand rather than habit, identify and clear slow-moving lines, reduce lead-time buffers where suppliers allow it, and — the step most businesses skip — measure it monthly rather than annually.