average days

Definition:

a ratio measuring the average number of days an item is held in the inventory. Since inventory costs 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 a company. Calculated as the number of units in inventory x 365 divided by annual usage in number of units.



Contribute:

Add to or refine this definition | Discuss on our forum

Share: