1. What is Age of Inventory?

Age of Inventory measures how long inventory items are held before being sold. It indicates the average number of days inventory remains in stock before turnover, helping businesses manage inventory efficiency and identify slow-moving items.

2. How Does the Calculator Work?

The calculator uses the Age of Inventory formula:

Where:

• \( Average Inventory Value \) — Average value of inventory held during the period (currency)
• \( COGS \) — Cost of Goods Sold for the period (currency/year)
• \( 365 \) — Number of days in a year

Explanation: This formula calculates the average number of days inventory is held before sale by comparing inventory value to the cost of goods sold over a year.

3. Importance of Inventory Age Calculation

Details: Monitoring inventory age helps businesses optimize stock levels, reduce carrying costs, identify obsolete inventory, improve cash flow, and enhance overall inventory management efficiency.

4. Using the Calculator

Tips: Enter the average inventory value and annual COGS in the same currency. Both values must be positive numbers. The result shows the average number of days inventory is held before sale.

5. Frequently Asked Questions (FAQ)

Q1: What is a good inventory age?
A: Ideal inventory age varies by industry, but generally lower values indicate better inventory turnover. Most businesses aim for 30-90 days depending on product type and industry standards.

Q2: How is average inventory value calculated?
A: Average inventory value is typically calculated as (Beginning Inventory + Ending Inventory) ÷ 2 for the period being analyzed.

Q3: What if my COGS is for a different period than one year?
A: Adjust the COGS to an annual basis or use the actual number of days in your reporting period instead of 365 in the formula.

Q4: How does inventory age affect business operations?
A: High inventory age may indicate overstocking, slow sales, or obsolete items, leading to increased storage costs and reduced cash flow.

Q5: What strategies can reduce inventory age?
A: Implement just-in-time inventory, improve demand forecasting, run promotions on slow-moving items, and optimize reorder points and quantities.