Enter the average inventory, cost of goods sold (COGS), and the number of days in the period into the calculator to determine the age of inventory. This calculator helps in understanding how long a company’s current inventory will last.

Age Of Inventory Formula

The following formula is used to calculate the age of inventory:

Age of Inventory = (Average Inventory / COGS) * Days in Period

Variables:

  • Average Inventory ($) is the average value of inventory over a certain period.
  • COGS ($) is the cost of goods sold during that period.
  • Days in Period is the number of days in the time period being analyzed.

To calculate the age of inventory, divide the average inventory by the cost of goods sold and then multiply by the number of days in the period.

What is Age of Inventory?

Age of inventory is a financial metric that indicates the average number of days it takes for a company to turn its inventory into sales. It is a measure of inventory management efficiency and liquidity. A lower age of inventory indicates that a company is selling its inventory quickly, which is generally positive as it reduces holding costs and increases cash flow. Conversely, a higher age of inventory may suggest overstocking or slow-moving inventory, which can tie up capital and increase storage costs.

How to Calculate Age of Inventory?

The following steps outline how to calculate the Age of Inventory:

  1. First, determine the average inventory value ($) for the period.
  2. Next, determine the cost of goods sold (COGS) ($) for the same period.
  3. Then, determine the number of days in the period being analyzed.
  4. Use the formula to calculate the Age of Inventory in days.
  5. After inserting the variables and calculating the result, check your answer with the calculator above.

Example Problem:

Use the following variables as an example problem to test your knowledge.

Average Inventory ($) = $50,000

Cost of Goods Sold (COGS) ($) = $200,000

Days in Period = 365 days