How to Calculate Inventory Turnover Days

Written by carter mcbride
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How to Calculate Inventory Turnover Days
Inventory ratio in days is a measure of economic performance. (Calculator image by Alhazm Salemi from Fotolia.com)

Inventory turnover in days takes a firm's inventory turnover ratio and divides it by 365. The ratio shows how many days it takes a company to sell off the inventory it has on hand. The lower the inventory ratio in days, for example three days, the faster a company sells off its inventory during the year. The higher the inventory ratio in days, for example 80 days, the slower a company sells of its inventory. This ratio is subjective, so you need to compare results with industry and similar firm results.

Skill level:
Easy

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Things you need

  • Financial statements

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Instructions

  1. 1

    Find cost of goods sold on a company's income statement. Find inventory on the same company's balance sheet.

  2. 2

    Divide cost of goods sold by inventory to calculate inventory turnover.

  3. 3

    Divide 365 by inventory turnover to calculate inventory turnover in days.

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