Inventory Days on Hand: How to Calculate and Optimize Inventory
Inventory Days on Hand is a measurement of how many days it takes a business to sell through their stock of inventory. Financial analysts and investors use it to determine how efficiently a business manages inventory dollars.
There are two main ways to calculate inventory days on hand. Both methods will return the same answer, so choose the one that is most convenient for you.
The first method is:
Average Inventory / (Cost of Goods Sold (COGS) / Days in the accounting period)
The inventory turnover method for calculating inventory days on hand looks like this:
Days in accounting period / Inventory turnover ratio = Inventory days on hand
Your inventory days on hand may fluctuate depending on the season. However, a general rule of thumb is that the lower your inventory days on hand, the more efficient your cash flow and, therefore, your business.
#Trends #Business #Ecommerce