Discipline: Economics
Age of inventory is a measure of the number days a firm holds inventory.
Age of inventory is calculated as follows:
Age of Inventory = 365 / Inventory Turnover
According to the formula above, if the inventory turnover rate of a firm is 5, then this firm's age of inventory equals to (365/5) 73 days.
Analysts favor shorter ages of inventory for salability and liquidity purposes.