Age of Inventory Calculator

Formula

The formula to calculate the age of inventory is:

\[ \text{Age of Inventory} = \left(\frac{\text{Average Inventory}}{\text{COGS}}\right) \times \text{Days in Period} \]

Where:

$ \text{Average Inventory} $ is the average value of inventory over a certain period in dollars
$ \text{COGS} $ is the cost of goods sold during that period in dollars
$ \text{Days in Period} $ is the number of days in the time period being analyzed

Age of Inventory: A financial metric that indicates the average number of days it takes for a company to turn its inventory into sales. It measures inventory management efficiency and liquidity. A lower age of inventory indicates quick sales, reducing holding costs and increasing cash flow, while a higher age suggests overstocking or slow-moving inventory, tying up capital and increasing storage costs.

Let's say the average inventory is $100,000, the cost of goods sold (COGS) is $500,000, and the days in the period is 365. Using the formula:

\[ \text{Age of Inventory} = \left(\frac{100000}{500000}\right) \times 365 \]

We get:

\[ \text{Age of Inventory} \approx 73\, \text{days} \]

So, the age of inventory is approximately 73 days.