- Days of Inventory = Inventory / Cost of Goods Sold * 365
- The ratio shows how many days the inventory remains in the company until it is sold.
Business actions to improve the ratio
- Increase the disposal of dead inventory
- Reduce inventory through stricter orders and more conservative sales forecasting
- The elasticity of the days of inventory ratio is also related to the profit margin.
- Maintaining a strict ratio can result in loss of turnover due to lack of availability
