master · Logistics & Supply Chain
Inventory Turnover, DSI & Cash-to-Cash Cycle
Meet the worker
Manager Vee — Retail DC Supervisor
quarterly review
Vee's category did $1.2M COGS this year on $200K average inventory. Corporate target is turn ≥ 8.
What they'll need
- Annual COGS
- Average inventory value
- Target turn ratio
How it's done — step by step
- 1
Compute turn
Turn = COGS / Avg Inventory = 1,200,000 / 200,000 = 6.0.
- 2
Compare to target
6 < 8 → carrying too much stock OR not selling fast enough.
- 3
Days on hand
365 / 6 = 61 days of inventory sitting on shelf.
- 4
Action lever
Cut avg inventory to $150K (turn rises to 8.0) OR promote slow SKUs.
COGS = $480k/yr, avg inventory = $60k. Compute turnover, days-sales-of-inventory (DSI), then layer in DSO (45 days A/R) and DPO (30 days A/P) to get the Cash Conversion Cycle — how many days your cash is trapped between supplier payment and customer collection.
Turns / year
8.00
Days of inv.
46
Tap Show next step to reveal the math one piece at a time.
Worked Example
Inventory turns and days
Given: COGS = $480k, avg inventory = $60k
- 1
Turnover ratio
480 ÷ 60 = 8 turns/yr