Days' Sales in Inventory Calculator

More about the Days' Sales in Inventory so you can better use the results provided by this solver. The Days' Sales in Inventory is the ratio between 365 and the inventory turnover. This ratio is a measure of asset management, and it indicates the average amount of days it takes for inventory to be sold.

How do you calculate days sales in inventory?

In order to compute the Days' Sales in Inventory, we first compute the inventory turnover using the following formula:

\[ \text{Inventory Turnover} = \displaystyle \frac{\text{Cost of Goods Sold}}{\text{Average Inventory}}\]

Now, once we have the inventory turnover, we compute the Days' Sales in Inventory using:

\[ \text{Days' Sales in Inventory} = \displaystyle \frac{365}{\text{Inventory Turnover}}\]

Example of other financial calculators

The Days' Sales in Inventory is a broadly used financial ratio to measure efficiency in asset management. We provide many other financial ratio calculators in our site, including our current ratio , quick ratio , our days' sales in receivables , and our inventory turnover calculator.

Example of day's sale in inventory

Question: Find the day's sales in inventory when the cost of goods sold is 3000, the current inventory is 1000, the the previous inventory is 800. Assume 365 days.

Solution:

This is the information we have been provided with:

Cost of Goods Sold \(COGS\) =	\(\text{\textdollar}3000\)
Current Inventory =	\(\text{\textdollar}1000\)
Previous Inventory =	\(\text{\textdollar}800\)

First, we need to compute the Inventory Turnover, which is computed using the following formula:

\[ \begin{array}{ccl} \text{Inventory Turnover} & = & \displaystyle \frac{\text{Cost of Goods Sold}}{\text{Average Inventory}} \\\\ \\\\ & = & \displaystyle \frac{\text{\textdollar}3000}{(\text{\textdollar}1000+\text{\textdollar}800)/2} \\\\ \\\\ & = & \displaystyle \frac{\text{\textdollar}3000}{\text{\textdollar}900} \\\\ \\\\ & = & 3.33 \end{array} \]

Now that we have the inventory turnover, the days' sale in inventory is computed as follows: \[ \begin{array}{ccl} \text{Days' Sale in Inventory} & = & \displaystyle \frac{365}{\text{Inventory Turnover}} \\\\ \\\\ & = & \displaystyle \frac{365}{3.33} \\\\ \\\\ & = & 109.5 \end{array} \]

Therefore, the days' sale in inventory is \(109.5\), for the given cost of goods sold of \(COGS = \text{\textdollar}3000\), current inventory of \(\text{\textdollar}1000\), and previous inventory of \(\text{\textdollar}800\). This means that firm's inventory sits an average of \(109.5\) days, before it is sold.