How this calculation works
Use compatible cost-valued balances and a two-point average. Keep zero turnover separate from an undefined days result, and do not annualize a quarterly or other period without saying so.
Turnover = period COGS / average inventory; inventory days = period days / turnoverA worked example
Opening ₹2,00,000 and closing ₹3,00,000 give average inventory ₹2,50,000. COGS ₹12,00,000 gives 4.8 turns over the entered period. On a 365-day basis that is about 76.041667 inventory days.
Good to know
A descriptive two-point-average ratio. No individual stock-age measurement, seasonality adjustment, valuation-policy resolution or industry target. Zero COGS gives zero turnover and undefined inventory days. Currency changes formatting only.
Reference: Reference: model definitions and scope (opens in a new tab) ↗
Cost-valued inventory should be compared with a cost flow
Opening inventory of ₹2,00,000 and closing inventory of ₹3,00,000 give a two-point average of ₹2,50,000. Dividing period COGS of ₹12,00,000 by that average gives 4.8 turns for the supplied period. Replacing COGS with sales revenue would change the basis because revenue includes a selling margin.
The balances must use compatible valuation and the same currency as COGS. Currency selection formats the amounts without conversion. The ratio does not tell you the physical age of each item or whether a write-down, return or valuation-policy change influenced the balances.
The cash conversion cycle calculator combines compatible inventory, collection and payment intervals. Inventory turnover itself describes a cost flow divided by average cost-valued stock.
The day basis belongs to the ratio
Using a 365-day period with 4.8 turns gives about 76.041667 inventory days. With the same numerical turnover over a 90-day reporting period, the result is 18.75 days. The calculator therefore asks for the length of the period rather than silently treating every input as annual.
Zero COGS with positive average inventory gives zero turns. It does not give zero days on hand: division by zero makes that days figure undefined. If both opening and closing inventory are zero, the average-inventory denominator is also undefined and the input needs correction.
A two-point average can hide movement within the period
The default average uses only the start and end balances. A business with a large seasonal build-up between those dates can have a different time-weighted or monthly average. The table illustrates changes in assumed average inventory at fixed COGS; it does not reconstruct the missing stock history.
The cash conversion cycle calculator combines an inventory interval with collection and payment intervals on a compatible basis. The profit margin calculator measures a separate relationship between cost and sales price. Neither a high turnover number nor a short inventory interval automatically establishes healthy margins, stock availability or liquidity.
A few questions, answered
Does turnover use sales revenue here?
No. It uses COGS divided by average inventory at cost. Keep the valuation basis compatible.
Is the result automatically annualized?
No. Turnover belongs to the entered reporting period; the days result uses the supplied period length.
Why is inventory days undefined with zero COGS?
The days relationship would divide by zero turnover. Zero is not a finite holding-period estimate.
Does this show the age of individual products?
No. It is a ratio of aggregate balances and flow, with a two-point average.