1. What Is Average Days In Inventory?

Average Days In Inventory (ADI) is a financial metric that measures the average number of days a company holds its inventory before selling it. It indicates inventory management efficiency and helps assess how quickly inventory turns over.

2. How Does The Calculator Work?

The calculator uses the ADI formula:

Where:

• \( \text{Average Inventory} \) — The average inventory level over a period (units)
• \( \text{COGS per day} \) — Cost of Goods Sold per day (units/day)

Explanation: This calculation shows how many days, on average, inventory items remain in stock before being sold.

3. Importance Of ADI Calculation

Details: ADI is crucial for inventory management, cash flow analysis, and operational efficiency. A lower ADI indicates faster inventory turnover, which is generally favorable for business liquidity and reduced holding costs.

4. Using The Calculator

Tips: Enter average inventory in units and COGS per day in units/day. Both values must be positive numbers for accurate calculation.

5. Frequently Asked Questions (FAQ)

Q1: What is a good ADI value?
A: Ideal ADI varies by industry, but generally lower values are better. Compare with industry benchmarks for meaningful analysis.

Q2: How is average inventory calculated?
A: Average inventory = (Beginning Inventory + Ending Inventory) ÷ 2 for a specific period.

Q3: What's the difference between ADI and inventory turnover?
A: ADI measures days inventory is held, while inventory turnover measures how many times inventory is sold and replaced in a period.

Q4: Can ADI be too low?
A: Extremely low ADI may indicate stockouts risk. Balance is needed between turnover and adequate stock levels.

Q5: How often should ADI be calculated?
A: Monthly or quarterly calculation helps track inventory management trends and identify issues early.