1. What is the Inventory Days Calculation Formula?

The Inventory Days formula calculates how many days a company's current inventory will last based on its average inventory and cost of goods sold. It's a key metric for inventory management and working capital efficiency.

2. How Does the Calculator Work?

The calculator uses the Inventory Days formula:

Where:

• \( ID \) — Inventory Days
• \( AI \) — Average Inventory ($)
• \( COGS \) — Cost of Goods Sold ($)

Explanation: The formula divides average inventory by daily cost of goods sold (COGS/365) to determine how many days the inventory would last at the current sales rate.

3. Importance of Inventory Days Calculation

Details: Inventory days is a crucial metric for assessing inventory management efficiency, cash flow optimization, and identifying potential overstocking or understocking issues.

4. Using the Calculator

Tips: Enter average inventory and cost of goods sold in dollars. Both values must be positive numbers to calculate valid results.

5. Frequently Asked Questions (FAQ)

Q1: What is a good inventory days number?
A: Ideal inventory days vary by industry, but generally lower numbers indicate better inventory turnover and cash flow efficiency.

Q2: How is average inventory calculated?
A: Average inventory is typically calculated as (Beginning Inventory + Ending Inventory) / 2 for a given period.

Q3: Why use 365 days in the formula?
A: 365 represents the number of days in a year, converting the ratio to a daily measurement for easier interpretation.

Q4: What does a high inventory days number indicate?
A: High inventory days may indicate slow-moving inventory, overstocking, or potential obsolescence issues.

Q5: How often should inventory days be calculated?
A: It should be calculated regularly (monthly or quarterly) to monitor inventory management performance and identify trends.