Cash flow
Inventory turnover and sell-through, and which one tells you something
Two ratios get quoted constantly and measure different things. One is a report for other people. The other can change what you order this week.
Marcus VolstedCo-founder, Restocio
Published 6 September 2026Updated 6 September 20265 min read
Inventory turnover is how many times a year you sell and replace your entire stock. Sell-through is the percentage of one delivery you have sold so far. The first describes your business to a bank. The second tells you whether a specific order was a mistake. Most advice treats them as interchangeable, which is how merchants end up with a healthy-looking ratio and a warehouse full of things nobody wants.
What is inventory turnover?
Cost of goods sold for the year, divided by the average value of the stock you held during it.
turnover = cost of goods sold ÷ average inventory value
Sell 2 400 000 kr of goods at cost while holding an average of 400 000 kr of stock, and your turnover is 6. You emptied and refilled the warehouse six times. Divide 365 by that and you get the same fact in a more useful unit: roughly 61 days of stock on hand.
The days version is worth preferring. A ratio of 6 means nothing on its own, and 61 days can be compared directly against how long your supplier takes to deliver, which is the only comparison that leads anywhere.
What is sell-through rate?
Units sold divided by units you received, over a defined period, as a percentage.
sell-through = units sold ÷ units received × 100
Take in 500 units and sell 300 in the first eight weeks and that is 60 percent. Unlike turnover, this is per product and per batch, so it survives being looked at. It answers whether that decision worked, while turnover answers how the business looks in aggregate.
Which one should you actually use?
Use sell-through to make decisions and turnover to report. They fail in opposite directions.
| Inventory turnover | Sell-through | |
|---|---|---|
| Scope | Whole catalogue | One product, one delivery |
| Answers | Is capital moving? | Was this order the right size? |
| Period | Usually a year | Weeks after a delivery |
| Fails by | Averaging away the problem | Saying nothing about the catalogue |
| Best for | Lenders, investors, year-on-year | Your next purchase order |
The averaging problem is the serious one. A catalogue turning over six times a year sounds healthy, and it stays sounding healthy while a handful of products sit still and quietly hold a third of your capital. The ratio is arithmetically correct and operationally useless, because you cannot act on a number that describes everything at once. Ranking products by their own days of cover finds the same money in a form you can do something about.
What is a good inventory turnover ratio?
There is no honest single answer, and any page that gives you one is guessing. It is set almost entirely by what you sell and how you buy. A grocer turns stock over dozens of times a year and a furniture importer three or four times, and neither is doing anything wrong.
The comparison that means something is against yourself, quarter on quarter, on a cost basis that has not changed in between. Change how you value stock and the ratio moves without your business moving at all, which is worth knowing before you read anything into a jump.
Why does turnover mislead importers specifically?
Because it can only see the warehouse, and an importer's money is not all in the warehouse.
Order from Asia by sea and you have paid for goods that will not arrive for two or three months. That capital is committed, it is unavailable, and it appears in no inventory turnover calculation until it lands and starts counting against you. Two businesses with identical turnover ratios can have completely different amounts of cash tied up, and the one with a container in the water is the one under pressure.
This is the same blind spot that makes a stock report feel reassuring in the week before everything arrives at once. If you import, the number worth watching is not how fast the warehouse empties. It is how much you have committed across stock on the shelf, stock on the water, and stock you are about to order, which is a different question and a harder one.
How Restocio looks at it
Days of cover per product rather than a catalogue ratio, calculated from the rate each product actually sells at, and net of what is already on its way. Goods in transit count as committed rather than absent, so the picture does not improve simply because a container has not docked yet. Products that have stopped moving surface on their own instead of waiting to be found in a year-end review.
What the app does not produce is a turnover ratio for your annual accounts. That figure needs a full-year cost of goods sold from your bookkeeping, not from a purchasing tool, and inventing it from partial data would be worse than leaving it to the system that has the whole year in it.
Common questions
How do you calculate inventory turnover?
Divide the cost of goods sold for a period by the average inventory value over the same period. Cost of goods sold of 2 400 000 kr against average stock of 400 000 kr gives a turnover of 6. Dividing 365 by the result converts it into days of stock on hand, which is usually the more useful form because it can be compared against your supplier's lead time.
What is the difference between inventory turnover and sell-through?
Turnover covers the whole catalogue over a year and describes how fast capital cycles through the business. Sell-through covers one product and one delivery over a few weeks and tells you whether that order was the right size. Use sell-through to decide what to buy next and turnover to report to a bank or an investor.
What is a good inventory turnover ratio?
It depends so heavily on the category that a single benchmark is misleading. A grocer turns stock dozens of times a year, a furniture importer three or four, and both can be well run. Compare against your own previous quarters on an unchanged cost basis rather than against a published average.
How do you calculate sell-through rate?
Divide units sold by units received over the period and multiply by 100. Receiving 500 units and selling 300 in eight weeks is a 60 percent sell-through. Measure it per product and per delivery, because averaging it across a catalogue reintroduces exactly the blind spot that makes turnover hard to act on.
Does inventory turnover include stock in transit?
No, and for importers that is its main weakness. Goods paid for and sitting on a ship are committed capital that appears nowhere in the calculation until they arrive. Two businesses can show the same turnover while one of them has a container of cash at sea, so the ratio understates how much money is actually locked up.
Marcus co-founded Restocio and works on it daily with a Swedish importer who plans their purchasing in it every working day. Restocio is built in Sweden by two founders, one Swedish and one Danish, and Marcus is the Danish one. Most of the examples on this blog come from that store's real ordering decisions rather than from a textbook. Why we are building it.
Related reading
- Dead stock, and how to spot it while it is still worth something
- Stock valuation for your accounts, and why freight belongs inside it
- Profitable but no cash, and where the money actually went
Restocio plans purchasing for Shopify stores that import. It works out what to order, how much, and whether it should travel by sea, rail or air, so you pay air freight only for the units that genuinely cannot wait.