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Inventory Turn Time Calculator
Turn time refers to the period of time it takes a business to sell a product. The inventory turnover rate measures the number of times we have turned our inventory during the past 12 months.
The following formula determines the inventory turn time:
Inventory Turn Time = Cost of Goods Sold from Stock Sales during the Past 12 Months/ Average Inventory Investment during the Past 12 Months
- Cost of Goods Sold only includes orders shipped from a warehouse inventory. Direct shipments or special orders are not included because they are never "inventoried".
- Inventory turnover is based on what you pay for an item (acquisition cost), not the selling price.
To determine your average inventory investment:
- Calculate the total value of every product in inventory (quantity on-hand times cost) every month, on the same day of the month. Use consistent costing methods for COGS and average inventory investment.
- If your inventory levels fluctuate over a month time horizon, calculate your total inventory value on the first and fifteenth of every month.