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Sir,
What is the difference between inventory days and inventory turnover..I found that inventory days is:
Closing Inventory
——————————-×365
Cost of goods soldAnd inventory turnover is quite the opposite!
Sir can you explain a bit about this?
Suppose the sales are $100,000 and the inventory is $10,000.
Then the inventory days is 10,000/100,000 x 365 = 36.5 days. This is the average number of days that inventory is held for before it is sold.
The inventory turnover is 100,000 / 10,000 = 10. This means that they are selling (turning over) the inventory 10 times a year. The higher the inventory turnover, the less time they are holding inventory for before selling it.
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