Age of Inventory Ratio

Age of Inventory Ratio
Formula to calculate age of inventory ratio:


Age of Inventory = 365 days / inventory turnover ratio



Age of inventory ratio definition and explanation:


The Age of Inventory shows the number of days that inventory is held prior to being sold.



An increasing age of inventory ratio indicates a risk in the company's inability to sell its products. Individual inventory items should be examined for obsolete or overstocked items.



A decreasing age of inventory may represent under-investment in inventory.

The Age of Inventory Ratio is also referred to as the Number of Days Inventory, Days Inventory or Inventory Holding Period.

The Age of Inventory ratio is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.