Average Age of Inventory
Financial Dictionary — Inventory & Operations
Definition
is calculated by the formula: 365 / inventory turnover.
Detailed Explanation
Average age of inventory estimates how long inventory sits before being sold. A common approximation is 365 divided by inventory turnover; higher days indicate slower-moving stock.
Common Uses
- Used to explain the concept in accounting and business contexts.
- Used when training staff or documenting procedures and policies.
- Used when training staff or documenting procedures and policies.
Practical Example
- Example: Teams reference **Average Age of Inventory** when defining terms in manuals, policies, or training materials.
Why This Term Matters
- Why it matters: Improves clarity and consistency across documentation and decision-making.