1. What is Average Inventory Period?

The Average Inventory Period (AIP) measures how many days inventory is held before being sold. It indicates inventory management efficiency and liquidity of inventory investments.

2. How Does the Calculator Work?

The calculator uses the Average Inventory Period formula:

Where:

• \( Avg Inv \) — Average inventory value ($)
• \( COGS \) — Cost of goods sold ($)
• \( 365 \) — Days in a year

Explanation: The formula calculates the average number of days that inventory is held before being sold, providing insight into inventory turnover efficiency.

3. Importance of AIP Calculation

Details: A lower AIP indicates efficient inventory management and faster inventory turnover, while a higher AIP may suggest overstocking or slow-moving inventory.

4. Using the Calculator

Tips: Enter average inventory and cost of goods sold in dollars. Both values must be positive numbers for accurate calculation.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Average Inventory Period?
A: Ideal AIP varies by industry. Generally, lower values are better, but compare with industry benchmarks for meaningful analysis.

Q2: How is average inventory calculated?
A: Average inventory = (Beginning inventory + Ending inventory) / 2 for a specific period.

Q3: What does a high AIP indicate?
A: High AIP may indicate slow-moving inventory, overstocking, or potential obsolescence risks.

Q4: How does AIP relate to inventory turnover?
A: AIP is the inverse of inventory turnover ratio. AIP = 365 / Inventory Turnover Ratio.

Q5: Can AIP be calculated for different periods?
A: Yes, adjust the days multiplier (use 52 for weeks, 12 for months) based on your analysis period.