How long inventory sits
Work out the average number of days goods wait on the shelf before they are sold, and what holding too much costs.
Task 1The inventory holding period3 questions
Inventory is cash sitting on a shelf. The inventory holding period is the average number of days goods wait before they are sold.
It is inventory ÷ cost of sales for the year × 365. Cost of sales is used, not sales, because inventory is valued at what it cost.
| Item | £ |
|---|---|
| Cost of sales for the year | 438,000.00 |
| Inventory at the year end | 36,000.00 |
Task 2When goods sit for longer2 questions
Task 3Too much, and too little3 questions