1. What is Average Age of Inventory?

The Average Age of Inventory measures how long inventory items are held before being sold. It's a key metric in inventory management that indicates the efficiency of inventory turnover and helps identify potential obsolescence risks.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• Average Inventory — The average value of inventory over a period (usually beginning and ending inventory divided by 2)
• COGS — Cost of Goods Sold during the same period
• 365 — Number of days in a year

Explanation: The formula calculates how many days on average inventory items remain in stock before being sold.

3. Importance of Inventory Age Calculation

Details: Monitoring inventory age helps businesses optimize stock levels, reduce holding costs, prevent obsolescence, and improve cash flow by identifying slow-moving items.

4. Using the Calculator

Tips: Enter the average inventory value and COGS in dollars. Both values must be positive numbers. The calculator will output the average age in days.

5. Frequently Asked Questions (FAQ)

Q1: What's a good average age of inventory?
A: This varies by industry. Generally, lower is better, but it depends on product type and business model. Compare with industry benchmarks.

Q2: How is average inventory calculated?
A: Typically, (Beginning Inventory + Ending Inventory) / 2. Some businesses use more detailed methods for seasonal variations.

Q3: What if my COGS is zero or negative?
A: The calculation requires positive COGS. Zero or negative COGS would indicate no sales or accounting errors.

Q4: How often should I calculate this metric?
A: Monthly or quarterly calculation is recommended for most businesses to track trends and make timely adjustments.

Q5: What's the difference between inventory age and inventory turnover?
A: Inventory turnover shows how many times inventory is sold and replaced in a period, while inventory age shows how long items stay in inventory.