Days Sales In Raw Materials Inventory

Volume based calculations may overstate the importance of inventories of low value materials.

Days sales in raw materials inventory. Company management uses these ratios to manage inventory use and may choose to manage inventory more aggressively by setting goals of higher inventory turnover. The days sales in inventory calculation also called days inventory outstanding or simply days in inventory measures the number of days it will take a company to sell all of its inventory. There are three types of inventory listed raw material and supplies work in progress and finished goods. Days of raw materials inventory may be calculated using value or volume.

Days sales in inventory dsi sometimes known as inventory days or days in inventory is a measurement of the average number of days or time required for a business to convert its inventory inventory inventory is a current asset account found on the balance sheet consisting of all raw materials work in progress and finished goods that a company has accumulated. The three most important types of inventory are the raw materials the work in progress wip inventory and the finished goods. For example using a raw materials turnover ratio of 5 0 the average number of days raw material stayed in inventory during the year was 365 divided by 5 0 or 73 days. Have a look at the colgate s inventory breakup for 2016 and 2015.