Days of inventory

If you kept selling at today's rate and never restocked, how many days would the stock on your shelves last? You get the answer by dividing what you hold by what you sell per day. A low number warns you that you are close to running out; a very high one means money sitting idle. That figure is called days of inventory, also known as stock cover or days of stock.

There are two common versions. Stock cover looks forward, in units: stock on hand divided by expected daily sales of that product. Days inventory outstanding, used in accounts, looks back and across the whole business: average stock value divided by the cost of goods sold per day, or 365 divided by inventory turnover. They answer slightly different questions, so say which you mean.

Look at it product by product. A single average hides a bestseller with three days left next to a slow line with a year's worth. Compare each product's days of inventory with its supplier lead time: if stock will run out sooner than the next delivery can arrive, it is time to order.