---
title: "Stock Turnover Ratio: Formula, Calculation, and How to Improve"
description: "Stock turnover ratio measures how fast your inventory sells. Learn the formula, healthy benchmarks by industry, and practical ways to improve it."
canonical_url: "https://billbabu.com/blog/stock-turnover-ratio-formula-calculation"
markdown_url: "https://billbabu.com/blog/stock-turnover-ratio-formula-calculation.md"
type: "blog-post"
language: "en-IN"
published: "2026-05-15"
last_updated: "2026-10-08"
author: "BillBabu Team"
category: "Inventory"
tags: ["stock turnover", "ratio", "inventory"]
site: "BillBabu (https://billbabu.com)"
---
# Stock Turnover Ratio: Formula, Calculation, and How to Improve

By BillBabu Team · Published 15 May 2026 · Updated 8 October 2026 · Category: Inventory

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.

**Built for Indian small businesses.** BillBabu is GST-compliant billing software that helps you create invoices, manage estimates, track payments and stay audit-ready — from your phone. [Learn more about BillBabu](https://billbabu.com/) or [download the app](https://play.google.com/store/apps/details?id=com.billbabu.app).

## Related guides

- [Product Catalog Management: Tips for E-Commerce and Retail](https://billbabu.com/blog/product-catalog-management-tips-ecommerce-retail): A clean product catalog is the backbone of any retail or e-commerce business. Learn how to structure, tag, and maintain yours for fast operations.
- [How to Set Up SKU Codes for Your Business](https://billbabu.com/blog/how-to-set-up-sku-codes-business): A smart SKU system saves hours every week. Learn how to design SKU codes that are short, meaningful, and scale with your product catalog.

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