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how to calculate the average number of days that inventory was held. Calculate the average number of days that inventory was held by Kelley Inc. The number of days is taken as 365 for a complete accounting year and 90 for a quarter.
Examine The Efficiency Of Inventory Management Using Financial Ratios Principles Of Accounting Volume 1 Financial Accounting from opentextbc.ca
The number of days is taken as 365 for a complete accounting year and 90 for a quarter. Days inventory outstanding DIO is the average number of days that a company holds its inventory Inventory Inventory is a current asset account found on the balance sheet consisting of all raw materials work-in-progress and finished goods that a before selling it. Assume 365 days in a year.
Therefore the inventory days would be 365 6 61 days approx. Days in Inventory formula is. You calculate the days in inventory by dividing the number of days in the period by the inventory turnover ratio. The average inventory days outstanding varies from industry to industry but generally a lower DIO is preferred as it indicates optimal inventory management.
