Stock turnover and dead stock
How fast your money goes round, and how much of it has stopped moving.
Last checked 20 September 2026
Inventory turnover is how many times a year you sell and replace your stock: cost of goods sold divided by average inventory. A higher number means your money is working harder. Dead stock is the tail that has stopped moving at all — and it is usually worth more attention than the average.
Calculating turnover
| Formula | |
|---|---|
| Average inventory | (Opening stock + closing stock) ÷ 2 |
| Inventory turnover | Cost of goods sold ÷ average inventory |
| Days of inventory | Days in the period ÷ turnover |
A worked example. COGS for the year ₹2.4 crore; opening stock ₹45 lakh, closing ₹55 lakh.
- Average inventory = (45 + 55) ÷ 2 = ₹50 lakh
- Turnover = 240 ÷ 50 = 4.8 times a year
- Days of inventory = 365 ÷ 4.8 = 76 days
So on average a rupee of stock sits for about two and a half months before it sells.
Inventory Turnover — free, no signupTurnover ratio and days of inventory from COGS and stock values.Use cost, not sales
Dividing sales by average inventory mixes a figure that includes margin with one that does not, and flatters the result. Cost of goods sold is the right numerator.
What is a good number?
It depends entirely on the trade. Fast-moving groceries turn many times a year; specialised industrial parts turn once or twice. The useful comparisons are:
- Against yourself, over time. Falling turnover means stock is accumulating faster than it sells.
- Against your payment terms. If stock sits 76 days and your supplier wants paying in 30, you are financing the gap.
- Between product groups. One group dragging the average down is a specific, fixable problem.
Why the average hides the problem
Turnover of 4.8 could be every item turning 4.8 times. It could equally be 70% of your catalogue turning 8 times and 30% not moving at all. Those are very different businesses, and the average cannot tell them apart.
So look at the distribution, not the mean. Sort items by turnover and read the bottom of the list.
Finding dead stock
Dead stock is inventory with no realistic prospect of selling. A workable definition for a distributor:
- No sales in six months, or
- Stock on hand exceeding twelve months of recent sales, or
- Expiring before you could plausibly sell it.
In TracEasy, the Product Usage Report over a long period against your stock list gets you there: items with stock and no usage.
What to do about it
- 1
Discount it while it still has value.
The instinct is to hold out for cost. Stock that has not moved in six months is usually not going to fetch cost, and waiting makes it worth less.
- 2
Bundle it with fast movers.
- 3
Offer it back to the supplier — some will take returns or exchange it, particularly for dated goods.
- 4
Write off what is genuinely worthless, so your stock value stops lying to you.
- 5
Then find out how it was bought, and stop buying it.
This is the only step that prevents the next ₹4 lakh of dead stock.
Cash today beats cost on paper
₹4 lakh of dead stock sold at half price is ₹2 lakh you can spend on something that moves. Held at "cost" it is ₹4 lakh on a report and nothing in the bank.
Should I calculate turnover per item or overall?
Both. Overall for the trend, per item to find out where the trend comes from.
Does slow-moving mean unprofitable?
Not necessarily. A high-margin line that turns twice a year can beat a thin-margin line that turns twelve times. Judge it on margin earned per rupee of stock, not on speed alone.
How often should I review this?
Turnover quarterly. Near-expiry stock monthly — that one has a deadline.