What is Inventory Days?
The Inventory Days metric gives investors and analysts an idea of how long, on average, it takes for a company to sell its inventory. A lower Inventory Days value indicates that the company is selling its inventory more quickly, which is generally considered favorable as it suggests efficient inventory management and strong sales performance.
Conversely, a higher Inventory Days value may indicate that the company is holding onto its inventory for a longer period, which could tie up capital and increase carrying costs. This could be a sign of overstocking, slow sales, or inefficient inventory management practices.
It's important to note that the ideal number of Inventory Days can vary widely by industry. For example, industries with perishable goods or rapidly changing technology may have lower Inventory Days, while industries with durable goods or longer sales cycles may have higher Inventory Days.
How to Calculate Inventory Days?
Inventory Days calculator uses Inventory Days = (Average Inventory/Cost Of Goods Sold)*365 to calculate the Inventory Days, The Inventory Days measures the average amount of time in which a company’s inventory is held on hand until it is sold. Inventory Days is denoted by ID symbol.
How to calculate Inventory Days using this online calculator? To use this online calculator for Inventory Days, enter Average Inventory (AI) & Cost Of Goods Sold (COGS) and hit the calculate button. Here is how the Inventory Days calculation can be explained with given input values -> 488.6531 = (328000/245000)*365.