A firm has a days' sales in inventory value of 46. This means the firm:

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A firm has a days' sales in inventory value of 46. This means the firm would take 46 days to turn company’s inventory into sales.

Days Sales in Inventory, also known as inventory days or days in inventory, is a measurement of the average number of days or time required for a business to convert its inventory into sales.

Generally, low days sales in inventory, indicates business efficiency in terms of sales performance and inventory management. Low days sales in inventory reflects fast sales of inventory stocks and hence minimization of handling costs as well as increase in cash flow.

On the other hand, a high days sales in inventory value indicates either a slow sales performance or an excess of purchased inventory, which may eventually become obsolete. However, it may also mean that a company with a high days sales in inventory has been maintaining high inventory levels to meet high customer demands.

The average days sales in inventory differs from one industry to another. To obtain an accurate days sales in inventory value comparison between companies, it must be done between two companies within same industry or that conduct the same type of business.

jeff jeffy answered 1 year ago

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