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
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:-