What it calculates
Use the result as a scenario, not a black box
Turnover connects purchasing to actual product movement. A higher turnover means the same inventory investment is supporting more cost-of-goods flow. Days on hand expresses the same relationship in a more operational way: roughly how many days of inventory the average balance represents at the current rate of sales.
How the math works
Inventory turnover = period COGS ÷ average inventory. Days on hand = period days ÷ turnover. Inventory-to-COGS ratio = average inventory ÷ period COGS.
Example
If 90-day COGS is $400,000 and average inventory at cost is $100,000, turnover is 4.0 times during the period. That corresponds to about 22.5 days of inventory on hand.