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Days of Inventory Cash Conversion Cycle 51200 2 Asset, Management, Efficiency, Inventory, Days, Supply Chain, Stock, Working, Capital The number of days worth of Inventory the company holds on its books
AE12
Difference between revisions of "AE12"
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{{math|{{this}}|{{frac|Inventory|Cost of Goods Sold|365 days}}}} | {{math|{{this}}|{{frac|Inventory|Cost of Goods Sold|365 days}}}} | ||
where | where | ||
| − | * Inventory = Average total Inventory (= average of beginning and ending inventories). This includes [[t:RM]], [[t:WIP]] and [[t:FG]] inventories | + | * Inventory = Average total Inventory at cost (= average of beginning and ending inventories). This includes [[t:RM]], [[t:WIP]] and [[t:FG]] inventories |
* [[m:CO11]] = Total annual Cost of Goods Sold | * [[m:CO11]] = Total annual Cost of Goods Sold | ||
Unit of measure: days (Calendar days) | Unit of measure: days (Calendar days) | ||
Latest revision as of 22:22, 21 April 2023
Days of Inventory measures the number of days worth of Inventory the company holds on its books.
Calculation
| Days of Inventory | ||||
| = |
| |||
where
- Inventory = Average total Inventory at cost (= average of beginning and ending inventories). This includes Raw Material, Work-in-Process and Finished Goods inventories
- Cost of Goods Sold = Total annual Cost of Goods Sold
Unit of measure: days (Calendar days)
Importance
A lower number of days indicate a better use of working capital. Reducing inventory frees up cash.
Notes
Days of Inventory measures all inventories of marketed products. This includes: Finished Goods, Raw Material, Work-in-Process, On-hold and Rejected. Days of Inventory reported by supply chain includes those inventories that are allocated to that specific supply chain. Returned products should therefore be reported for Reverse Logistics supply chain(s).
Community Importance Rating: Hierarchy
| ID | Name | Level | x |
|---|---|---|---|
| AE1 | Cash Conversion Cycle | 1 | AE1 |
| AE12 | Days of Inventory | 2 | AE12 |
| AE121 | Days of Raw Materials Inventory | 3 | AE121 |
| AE122 | Days of WIP Inventory | 3 | AE122 |
| AE123 | Days of Finished Goods Inventory | 3 | AE123 |
Process(es)
| ID | Name | Level | x |
|---|---|---|---|
| P1 | Plan Supply Chain Operations | 2 | P1 |
| P2 | Plan Source | 2 | P2 |
| P3 | Plan Make | 2 | P3 |
| P4 | Plan Deliver | 2 | P4 |
| P403 | Calculate Delivery Plan | 3 | P403 |
| S006 | Negotiate | 3 | S006 |
| S1 | Source-to-Replenish | 2 | S1 |
| S2 | Source-to-Order | 2 | S2 |
| S3 | Source-to-Engineering-Order | 2 | S3 |
| M1 | Make-to-Stock | 2 | M1 |
| M2 | Make-to-Order | 2 | M2 |
| M204 | Produce | 3 | M204 |
| M3 | Make-To-Engineering-Order | 2 | M3 |
| M305 | Produce | 3 | M305 |
| M309 | Transfer | 3 | M309 |
| M4 | Re-Make | 2 | M4 |
| M410 | Transfer | 3 | M410 |
| D1 | Deliver-From-Stock | 2 | D1 |
| D2 | Deliver-to-Order | 2 | D2 |
| D3 | Deliver-To-Engineering-Order | 2 | D3 |
| D4 | Deliver Returns | 2 | D4 |