Inventory turnover period
Inventory holding period is inventory divided by cost of sales, multiplied by 365 days; average inventory may be used when available. This approximation converts the inventory balance into days of cost of sales. It is useful for comparing how much stock is held, but seasonality, obsolete items and changes in purchase prices can distort a year-end figure. A longer period is not automatically inefficient.
Worked example
Inventory 100 and annual cost of sales 500 give 73 days.
Common mistake
Use cost of sales rather than revenue; state whether closing or average inventory is used and compare consistently.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Supporting | July 2027–August 2028 |
| CIMA | BA3 | Direct | Official assessment-window verification pending |
| CIMA | F1 | Direct | Official assessment-window verification pending |
| CIMA | F2 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |
Related terms
Also called: Inventory holding period, Inventory days