Fundamental Glossary / Working Capital & Operational Efficiency
Inventory Days
The average number of days stock is held.
Formula
Average inventory / cost of goods sold x number of days.
What it means
Inventory days say how long goods sit before they are sold. It is the reciprocal of inventory turnover, expressed in days.
Finished goods, work in progress, and raw materials can be disclosed separately. A build in raw materials may be a planned production run. A build in finished goods may be weak demand.
How to read it
Falling days release cash. Rising days, especially in finished goods while sales stall, are a sign the company is producing what it cannot sell.
What to watch
Write-downs reduce the carrying amount and can make days look better after the bad news has already hit profit. Look at quantities if they are disclosed.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.