![]() ![]() This means that the company, for its entire inventory in general, had an average of 218.5 days of inventory on hand. 365 are the most common but some analyst prefers to use 360. Inventory Days On Hand (DOH) = 365 or 360 / Inventory TurnoverĪsk your accounting or finance department what days to use in your calculation. Inventory Turnover (Turns) = $5,000,000 / $3,000,000 = 1.67ġ.67, this means that the company turned over its inventory 1.67 times during your time period and in this case, 12 months. Inventory Turnover (Turns) = Cost of Goods Sold (COGS) / Average Inventory The inventory values can be obtained from the Balance Sheet. Each item or SKU will have it’s own DOH, which will be explained later in this post.Ĭost of Goods Sold (COGS): Cost of Goods Sold is derived from the Income Statement you can get this from your accounting department for the period you are working in.Īverage Inventory depends on the time period you are working with, if you are working within a month, you take your total consumption of parts and divide by 30. For example, if you have 30 (DOH), that means your inventory has 30 days worth of inventory on hand during that period. The Inventory Days On Hand (DOH) ratio specifies how many days worth of inventory the company has at it’s disposal. The Inventory Turnover ratio measures how effectively a company is using its inventory. There has been so much written on these two Key Performance Indicators (KPI’s) but I wanted to give you my perspective on how I have trained my colleagues to which helps them understand these metrics. ![]()
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