What is my average inventory days? Efficiency ratios are a great way of analysing the underlying operational efficiency of a business. Jazoodle assesses the efficiency of a company in a number of ways. Areas such as client revenue collection, or how effective its employees are in generating revenues and keeping costs at reasonable levels.
Average Inventory Days (AID)
How do you measure the efficiency of people and processes within your organisation? The average inventory days metric is a great way of doing this, and an indicator of company efficiency. Assess this over time and compare periods. In Jazoodle, we assess and compare AID across financial years as well as on an individual monthly basis.
What does it mean?
Definition: Total spend on direct costs related to total inventory amounts averaged over a year
Days Sales in Inventory In conjunction with the Inventory turnover ratio, this measures the number of days it takes to sell stock. The greater the number, the older the stock is likely to be.
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How do we derive your AID?
Your AID is derived by:
365 divided by (Total Cost Of Goods Sold divided by Total Inventory)
How Can I Improve my AID?
Your AID can be improved in a number of ways, including:
- Implement “Just In Time” methods with your suppliers
- Devise lagging stock sales
- Ensure you keep your eye on market shifts and trends