In our example, an inventory turnover of 8 times per year translates to 45.6 days (365/8). Just take the number of days in a year and divide that by the inventory turnover. Basically, DSI is the number of days it takes to turn inventory into sales, while inventory turnover determines how many times in a year inventory is sold or used. DSI is essentially the inverse of inventory turnover for a given period-calculated as (Average Inventory / COGS) x 365. Meanwhile, days of inventory (DSI) looks at the average time a company can turn its inventory into sales. For instance, in a grocery store, milk will turn over relatively quickly (we hope) while Holiday cards may turn over much more slowly. You can learn how to calculate this way by taking your cost of goods sold. Inventory turnover shows how quickly a company can sell its inventory, measuring that velocity by number of times per year the inventory theoretically rolls over completely. The Average Days to Sell the Inventory metric is calculated by dividing 365 (the number of days) by the Inventory Turnover Ratio. There is one other way, and that is through calculating your inventory turnover ratio. The calculation is very simple: simply divide the average stock per product by the sales, multiplying by the period in days (here we are talking about values. If the company’s line of business is to sell merchandise, the more often it does so, the more operationally successful it is. Inventory turnover is also a measure of a firm’s operational performance. Inventory Turnover Ratio Cost of Goods Sold/ Average Inventory Inventory Turnover Ratio 1,000,000 / 3500000 Inventory Turnover Ratio 0. The more often inventory is sold, the more cash generated by the firm to pay bills and debts. Average Inventories (3,000,000 + 4,000,000)/2 Average Inventories 3500000 Then, we calculate Inventory Turnover Ratio using the Formula. For the Years Ended Decemand 2018 Description
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