1. What is Inventory Days?

Inventory Days, also known as Days Inventory Outstanding (DIO), measures how many days it takes for a company to turn its inventory into sales. It indicates the efficiency of inventory management and working capital utilization.

2. How Does the Calculator Work?

The calculator uses the Inventory Days formula:

Where:

• \( Avg\ Inv \) — Average Inventory value (USD)
• \( COGS \) — Cost of Goods Sold (USD)

Explanation: The formula divides average inventory by the average daily cost of goods sold to determine how many days' worth of inventory the company is holding.

3. Importance of Inventory Days Calculation

Details: Calculating Inventory Days helps businesses optimize inventory levels, improve cash flow, reduce holding costs, and identify potential issues with inventory management or sales performance.

4. Using the Calculator

Tips: Enter the average inventory value and cost of goods sold in USD. Both values must be positive numbers. The calculator will compute how many days the current inventory would last based on the cost of sales.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Inventory Days value?
A: This varies by industry, but generally, lower values indicate more efficient inventory management. Compare with industry benchmarks for context.

Q2: How is average inventory calculated?
A: Average inventory is typically calculated as (Beginning Inventory + Ending Inventory) / 2 for a specific period.

Q3: Why use COGS instead of sales in the denominator?
A: COGS represents the actual cost of inventory sold, making it a more accurate measure than sales revenue which includes profit margins.

Q4: What does a high Inventory Days value indicate?
A: High values may suggest overstocking, slow-moving inventory, or declining sales, which can tie up working capital and increase storage costs.

Q5: How often should Inventory Days be calculated?
A: It should be monitored regularly (monthly or quarterly) to track inventory efficiency trends and identify issues early.