DAYS INVENTORY Definition

Bookmark and Share

DAYS INVENTORY shows the average length of time items are in inventory, i.e., how many days a business could continue selling using only its existing inventory. The goal, in most cases, is to demonstrate efficiency through having a high turnover rate and therefore a low days' inventory. However, realize that this ratio can be unfavorable if either too high or too low. A company must balance the cost of carrying inventory with its unit and acquisition costs. The cost of carrying inventory can be 25% to 35%. These costs include warehousing, material handling, taxes, insurance, depreciation, interest and obsolescence. Formula: Inventory / (Net Revenue / 365).

Learn new Accounting Terms

PROXY is a person authorized to act for another, e.g. a power of attorney document given by shareholders of a corporation authorizing a specific vote on their behalf at a corporate meeting.

YIELD TO MATURITY (YTM) is the rate of return the investor will earn if a bond is held to maturity.

Suggest a Term

Enter Search Term

Enter a term, then click the entry you would like to view.