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Inventory Period Calculator

Jun 11, 2018 0 Comments
Inventory Period Calculator is a tool that calculates the average number of days, at a given time, when goods are held in inventory before being sold
Inventory Period:
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Background Information

What does Inventory Period mean?
The Inventory Period shows how long it takes a company to sell its current inventory. Or it tells how long inventory sits on the shelf and remains unsold. This ratio can be considered an efficiency ratio and is important as it shows how inventory turnover changes over time.
Formula

Inventory Period = 365 × Average Inventory / Annual Cost of Goods Sold

The inventory period also can be calculated as 365 divided by inventory turnover:-

Inventory Period = 365 / Inventory Turnover

Example

A firm’s annual report shows the beginning inventory as $500,000 while its ending inventory is $550,000. Now, divide the sum of $1,050,000 by two to get the average inventory of $525,000 for the year.

The inventory turnover for the year equals ($5,000,000) / ($525,000) i.e. 9.5

Therefore, Inventory Period is:-

  • = 365 days / 9.5 = 38 days

Tags

FINANCE   COMPANY  

 
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History
Jun 11, 2018
Tool Launched