number of days of inventory on hand definition

number of days of inventory on hand

Ratio measuring the average number of days an item is held in the inventory. Since inventory cost represents the opportunity cost of funds, this ratio indicates how well inventory is being managed, and is one of the elements in determining the operating cycle of the firm. Formula: Number of units in inventory x 365 ÷ Annual usage in number of units.

number of days of inventory on hand is in the Accounting & Auditing and Inventory Control & Storage subjects.

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