Age of Inventory

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.


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