Both sides of the fraction in cost
The numerator is the cost of the goods you sold over the year. The denominator is the cost value of the stock you usually hold. Using cost on both sides keeps the ratio honest - retail prices on one side would make the turnover look far healthier than the cash flow is.
If your records only carry retail value, convert it back at your gross margin before entering it. Dividing a retail figure by a cost figure mixes two bases and produces a turnover that looks fast for no reason other than the units.
The page reads both fields as money, stops with a prompt if either is zero, and caps each at the site’s shared money ceiling, so a mistyped figure cannot quietly turn into an infinite turn rate.
Turnover is the number of times the shelf empties
Divide the two and the answer is how often the average stock level sells out in a year. The defaults do it cleanly: $132,000 of goods sold against a $24,000 average level turns 5.5 times.
The ratio is printed to two decimals, which matters at the low end: a business turning once and a business turning 1.4 times read as very different operations even though both numbers look small. The higher the count, the more sales the same shelf area and the same tied-up cash are supporting.
A falling count usually shows up in storage bills and markdowns before it shows up in the profit line, because the stock is still an asset on paper while it is losing value on the shelf.
Days of stock on hand reads it as a wait
365 divided by the turnover is how many days the shelf takes to turn once. The turnover says five and a half times; the days say 66.36 - the same fact in the unit a buyer feels when the shelf runs thin.
Put the days beside your supplier’s lead time. If one turn takes 66 days and a reorder takes 45, the window in which the shelf is deep enough is narrow, and a late delivery turns straight into a stockout.
The page prints the days in the hero stats and repeats it in the table, so the two views can never drift apart: one is computed from the other, and dividing 365 by the days returns the turnover.
The right level belongs to the product
Fast-moving consumables live at high turnover and big-ticket items naturally turn slowly. The page refuses to pick a benchmark for you, because a number borrowed from another category says more about that category than about your shelf.
The useful comparison is your own history, and ideally year over year rather than month over month. Stocking up before a season lowers the ratio, the weeks after it raise it, and a single month compared against another single month mostly measures the calendar.
What a low number costs is not abstract: capital tied up, storage, insurance and shrinkage are the lines the holding-cost page beside this one prices in dollars. This page shows the ratio; that page shows the bill.
Turnover in cash: GMROI and the cash cycle
Turnover says how fast stock moves; GMROI says whether moving it is worth the shelf. Gross profit divided by average inventory at cost: a 30% margin on $132,000 of sales is $39,600 of gross profit against $24,000 of stock, so every dollar on the shelf returns $1.65 a year. The same 5.5 turns at a 15% margin return $0.83, so the faster, thinner business can be the worse one.
Days of stock on hand look backwards; days of supply look forward. If the next 30 days are forecast to sell $11,000 at cost while you hold $24,000, the shelf holds 65 days of supply - and that equals 365 divided by turnover only when the current run rate matches the year.
The ratio becomes cash only after the whole cycle: 66 days of inventory plus 30 days of receivables minus 45 days of payables is 51 days of cash tied up. On $24,000 of stock that is roughly $3,350 of working capital sitting on the shelf; turning in 45 days instead of 66 frees about $2,000 of it.
Cost basis discipline decides whether the number means anything. Mixing retail-priced stock with cost-priced COGS inflates the ratio by the markup: at a 40% margin a genuine 5.5x reads as 9.2x. Both sides of this page want the same basis, which is why the field asks what the goods cost you.
Dead stock is invisible to an average. The ratio treats every dollar of inventory as equally alive, while $4,000 that has not sold in a year earns nothing and, at a 25% holding cost, quietly bills you $1,000 a year. Excluding it from the average shows the turnover of the part that moves - and hands you a markdown list.
Read the ratio against your own season rather than a benchmark: a costume retailer turns eight times in October and once in February, and its annual 3.0 is the average of two different businesses.
One operational consequence: turnover is a buying decision, not a score. If the number is falling while margins hold, the next purchase order is the lever - smaller and more often costs a little more per unit and frees the cash that the shelf was holding.
Danfio