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Calculate Inventory Turnover Days

Inventory Turnover Days Formula:

\[ \text{Inventory Turnover Days} = \frac{365 \times \text{Average Inventory}}{\text{Cost of Goods Sold (COGS)}} \]

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1. What is Inventory Turnover Days?

Inventory Turnover Days measures how many days on average it takes for a company to sell its inventory. It's a key metric for assessing inventory management efficiency and working capital requirements.

2. How Does the Calculator Work?

The calculator uses the Inventory Turnover Days formula:

\[ \text{Inventory Turnover Days} = \frac{365 \times \text{Average Inventory}}{\text{Cost of Goods Sold (COGS)}} \]

Where:

Explanation: The formula shows how many days worth of inventory the company typically holds before selling it.

3. Importance of Inventory Turnover Days

Details: This metric helps businesses optimize inventory levels, improve cash flow, and identify potential obsolescence issues. Lower days generally indicate more efficient inventory management.

4. Using the Calculator

Tips: Enter average inventory and COGS in dollars. Both values must be positive numbers. The calculator will compute how many days the current inventory would last at the current sales rate.

5. Frequently Asked Questions (FAQ)

Q1: What's a good inventory turnover days number?
A: It varies by industry. Retailers might aim for 30-90 days, while manufacturers might have higher values. Compare with industry benchmarks.

Q2: How is this different from inventory turnover ratio?
A: The ratio shows how many times inventory is sold/replaced in a period, while days shows the average time items stay in inventory.

Q3: Should I use 365 or actual business days?
A: 365 is standard for annual calculations. For seasonal businesses, shorter periods might be more appropriate.

Q4: What if my inventory levels fluctuate significantly?
A: Use more frequent inventory measurements (monthly or quarterly) to calculate a more accurate average.

Q5: How can I improve my inventory turnover days?
A: Strategies include better demand forecasting, just-in-time inventory, promotions for slow-moving items, and supplier negotiations.

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