Days in inventory
Days in inventory is an efficiency ratio that measures the average number of days the company holds its inventory before selling it. The ratio measures the number of days funds are tied up in inventory. Inventory levels are divided by sales per day
The formula for days in inventory is:
where DII is days in inventory and COGS is cost of good sold. The average inventory is the average of inventory levels at the beginning and end of an accounting period, and COGS/day is calculated by dividing the total cost of goods sold per year by the number of days in the accounting period, generally 365 days.
This is equivalent to the 'average days to sell the inventory' which is calculated as:
The article on inventory turnover provides a more complete discussion of issues related to the diagnosis of inventory effectiveness, although it does not provide these synonyms.
