Stock Turnover Ratio: Formula, Calculation, and How to Improve

Stock turnover ratio measures how fast your inventory sells. Learn the formula, healthy benchmarks by industry, and practical ways to improve it.

Definition and formula

Stock Turnover Ratio = Cost of Goods Sold ÷ Average Inventory. Higher ratio = inventory moving faster. Example: COGS Rs. 60 lakh, avg inventory Rs. 10 lakh → ratio 6 (stock turns 6 times a year).

Healthy benchmarks

Apparel: 4-6x. Electronics: 6-10x. FMCG: 10-15x. Restaurants: 25-50x. Lower than benchmark? Excess stock or slow movers. Higher? Possibly stocking out.

Days of inventory on hand

Convert turnover to days: 365 ÷ turnover. Ratio of 6 = 60 days of inventory. Useful for cash-flow planning.

How to improve

1) Identify slow-moving SKUs and clear them. 2) Tighten reorder quantities. 3) Negotiate smaller, more frequent deliveries with suppliers. 4) Promote bundles to move dead stock.

Track in your software

BillBabu reports show top sellers and dead stock. Review monthly and adjust purchases — small tweaks compound to big savings.

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