1. What is Inventory Days?

Inventory Days, also known as Days Inventory Outstanding (DIO), measures the average number of days a company holds its inventory before selling it. It indicates how efficiently a company manages its inventory.

2. How Does the Calculator Work?

The calculator uses the Inventory Days formula:

Where:

• \( Average\ Inventory \) — Average value of inventory held during the period (USD)
• \( COGS\ per\ Day \) — Cost of Goods Sold per day (USD/day)

Explanation: This ratio shows how many days it takes for a company to turn its inventory into sales. Lower values indicate more efficient inventory management.

3. Importance of Inventory Days Calculation

Details: Inventory Days is a key financial metric that helps businesses optimize inventory levels, reduce holding costs, improve cash flow, and identify potential inventory management issues.

4. Using the Calculator

Tips: Enter average inventory in USD and COGS per day in USD/day. Both values must be positive numbers. The result shows the number of days inventory is typically held before sale.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Inventory Days value?
A: It varies by industry, but generally lower values are better. Compare with industry averages and historical company performance.

Q2: How do I calculate Average Inventory?
A: Average Inventory = (Beginning Inventory + Ending Inventory) / 2 for the period being analyzed.

Q3: How do I calculate COGS per Day?
A: COGS per Day = Total Cost of Goods Sold for the period / Number of days in the period.

Q4: What does a high Inventory Days value indicate?
A: High values may indicate slow-moving inventory, overstocking, or potential obsolescence issues.

Q5: Can Inventory Days be too low?
A: Extremely low values might indicate stockouts or insufficient inventory to meet customer demand, potentially losing sales.