Stock on the shelf is cash that has stopped moving. Inventory turnover tells you how many times a year that cash comes back — cost of goods sold divided by average inventory — and its twin, days sales of inventory, tells you how many days a rupee sits in stock before a customer pays for it. Together they explain why a profitable shop can be permanently short of cash. This calculator computes turnover ratio and DSI for a product, a category or the whole business, and shows how much cash a faster turn would release.
The formulas
- Inventory turnover = Cost of goods sold ÷ Average inventory (at cost), where average inventory = (opening + closing) ÷ 2.
- Days sales of inventory (DSI) = 365 ÷ Turnover.
- Cash released by improving turnover = COGS ÷ old turnover − COGS ÷ new turnover.
A garment shop with ₹72 lakh annual COGS and average stock of ₹18 lakh turns 4× a year; DSI is 91 days. Raising turnover to 6× (DSI 61) would free ₹6 lakh of cash — roughly the working-capital loan it currently pays 14% on.
How to use the calculator
- Enter COGS for the period (from your books, or sales × (1 − gross margin) using the gross margin calculator).
- Enter opening and closing inventory at cost (or average inventory directly).
- Choose the period (year, quarter, month); the tool annualises.
- Read turnover, DSI, and the cash tied up; move the target-turnover slider to see the cash released.
- Run it per category — the overall number hides the slow lines.
Benchmarks (indicative, India)
| Trade | Turnover per year | DSI |
|---|---|---|
| Grocery / kirana | 12–24 | 15–30 days |
| Pharmacy | 6–10 | 35–60 |
| Apparel | 3–5 | 75–120 |
| Electronics retail | 6–10 | 35–60 |
| Furniture | 2–4 | 90–180 |
| Manufacturing (raw + finished) | 4–8 | 45–90 |
Low turnover is not always bad (jewellery, books) and high turnover can mean stock-outs. Read it with your gross margin: margin × turnover ≈ gross margin return on inventory, the number that decides which categories deserve shelf space.
Speeding up the turn
- Order smaller, more often; the purchase order tool makes repeat orders quick.
- Forecast by category and check errors with the forecast accuracy calculator; over-forecasting is the usual root of dead stock.
- Clear slow lines early: a 20% markdown at 60 days beats 50% at 180; the discount calculator shows the margin after markdown.
- Track by SKU with barcodes (barcode generator) so counts are real.
- Consignment and sale-or-return for seasonal items — goods move on a delivery challan and are invoiced when sold.
- Festive planning: stock up 6–8 weeks before Diwali but plan the sell-through; the timeline is in the festive season checklist.
Stock and tax
Closing stock is valued at cost or net realisable value, whichever is lower; obsolete stock written down reduces taxable profit. GST input credit on unsold stock stays with you, but goods destroyed or written off require ITC reversal. Keep the stock register; it is also the base for the audit trail if turnover crosses the tax-audit threshold.
Related tools
- Gross margin calculator — margin × turnover is the real test.
- Forecast accuracy — reduce over-ordering.
- Discount calculator — clear slow stock profitably.
- Purchase order — smaller, frequent orders.
- EMI calculator — what the working-capital loan on your stock costs.
- Defect rate calculator — stock written off as unsellable.