FREE online courses on Financial Ratio Analysis - Efficiency Ratios - Days in Inventory

 

Days in Inventory is the average number of days we held our inventory before a sale. A low number of inventory days is desirable. A high number of days implies that management is unable to sell existing inventory stocks. Days in Inventory is calculated as follows:

 

365 or 360 or 300 / Inventory Turnover

 

EXAMPLE - If we refer back to the previous Example and we use the entire calendar year for measuring inventory, then on average we are holding our inventories 228 days before a sale. 365 / 1.6 = 228 days.