--- title: How to calculate Inventory Turnover Ratio [infographic] description: James explains how much stock is too much, and how to calculate a business' Inventory Turnover Ratio. image: https://blog.jpabusiness.com.au/hubfs/3.%20Infographics%20and%20cheat%20sheets/How%20to%20calculate%20inventory%20turnover%20ratio.png --- 29 April 2025 # How to calculate Inventory Turnover Ratio [infographic] WRITTEN BYJames Price | JPAbusiness ![Inventory 002](https://blog.jpabusiness.com.au/hs-fs/hubfs/1.%20Images/1.%20Stock%20Images/Inventory%20002.jpg?width=1000&height=667&name=Inventory%20002.jpg) The first step in determining the correct stock holding for your business is to understand your current **Inventory Turnover Ratio (ITR)** i.e. your stock turn. As a rule of thumb, a stock holding that represents** 12 months worth of sales **is the maximum needed. However, it’s very hard to generalise. Some businesses are import oriented so need to commit to a certain level of stock to ensure their freight rate is not exorbitant and/or they have sufficient stock ordered from a single season pre-order. This may cause lumps in their stock holdings. At the other end of the scale are** products that are rapidly changing** in terms of the market acceptance due to changes in technology. A 12-month stock holding of sales in that sector would be far too extensive. Often these stock holdings are measured in days or weeks. We have created the following infographic to help you calculate your ITR. [![How to calculate inventory turnover ratio](https://blog.jpabusiness.com.au/hs-fs/hubfs/3.%20Infographics%20and%20cheat%20sheets/How%20to%20calculate%20inventory%20turnover%20ratio.png?width=500&name=How%20to%20calculate%20inventory%20turnover%20ratio.png)](https://blog.jpabusiness.com.au/hubfs/3.%20Infographics%20and%20cheat%20sheets/How%20to%20calculate%20inventory%20turnover%20ratio.pdf) **ITR benchmarks will vary depending on what industry you’re in**. They will be impacted by things like: - how quickly stock usually moves - how long the sales process is - how long the order process is (to the extent you can just-in-time order to fill a customer enquiry, versus having stock ready for them when they need it). I can’t give you a hard and fast ITR benchmark, but using this r**atio **will allow you to** pressure test whether you’re managing your inventory closely**. Efficient stock management will impact your working capital position. Having a significant portion of slow moving or obsolete stock may impact the value of your business in a sale or transition process. The JPAbusiness team provides [advice ](https://www.jpabusiness.com.au/business-advice)on a range of stock management issues, including the following:  - determining the **correct stock holding** for your industry - assessing your **inventory management processes** - gauging how your inventory management processes may be impacting your **business value**. You can [contact ](https://landing.jpabusiness.com.au/contactus)the team on **02 6360 0360 **or** 02 9893 1803** for a confidential, obligation-free discussion if you would like more information about any of these issues. ![Managing cashflow and working capital cover 2022](https://blog.jpabusiness.com.au/hubfs/1.%20Images/Updated%20document%20cover%20images%202022/Managing%20cashflow%20and%20working%20capital%20cover%202022.png) Free ebook Managing cashflow and working capital This ebook covers: How to manage inventory to maximise value, including how to calculate Inventory Turnover Ratio; How cash flow and working capital affect business value; BONUS Working Capital Checklist. [Learn more ](https://blog.jpabusiness.com.au/operator/managing-cash-flow-and-working-capital) Share this Article Share this blog post on Twitter [mailto:?subject=Share%20this%20blog%20post&body=https://blog.jpabusiness.com.au/blog/how-to-calculate-inventory-turnover-ratio-itr-infographic](mailto:?subject=Share%20this%20blog%20post&body=https://blog.jpabusiness.com.au/blog/how-to-calculate-inventory-turnover-ratio-itr-infographic) Copied to clipboard Topics - [cash flow ](https://blog.jpabusiness.com.au/blog/topic/cash-flow) - [working capital ](https://blog.jpabusiness.com.au/blog/topic/working-capital) - [inventory ](https://blog.jpabusiness.com.au/blog/topic/inventory) - [infographic ](https://blog.jpabusiness.com.au/blog/topic/infographic) - [inventory turnover ratio ](https://blog.jpabusiness.com.au/blog/topic/inventory-turnover-ratio) - [stock ](https://blog.jpabusiness.com.au/blog/topic/stock) - [stock control ](https://blog.jpabusiness.com.au/blog/topic/stock-control) - [stock turn ](https://blog.jpabusiness.com.au/blog/topic/stock-turn) - [calculation ](https://blog.jpabusiness.com.au/blog/topic/calculation) About James Price | JPAbusiness James Price has over 30 years’ experience in providing strategic, commercial and valuation advice to Australian and international business clients. James’ blogs provide business advice for aspiring and current small to mid-sized business owners, operators and managers. #### Related Blog Posts ### [Working Capital Checklist: drive cash flow today and boost value on exit](https://blog.jpabusiness.com.au/blog/working-capital-checklist-drive-cash-flow-today-and-boost-value-on-exit) As a business owner or manager, there are a number of 'levers' you need to control to successfully... [Read more ](https://blog.jpabusiness.com.au/blog/working-capital-checklist-drive-cash-flow-today-and-boost-value-on-exit) ### [Identifying potential for growth (case study and testimonial)](https://blog.jpabusiness.com.au/case-studies/identifying-potential-for-growth-case-study-and-testimonial) Services provided by JPAbusiness: Business valuation Business advice Business background This... 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