Definition of Average Inventory Period Ratio


Average inventory period is used to measure the average numbers of days over the given time period, goods are held in inventory before sold.

So from this investors and analysts analyze that how long the company takes to sell its current inventory.

Definition of Average Inventory Period Ratio

Average Inventory Period is important in this ratio because it shows how inventory turnover change over time.

For management, this is the important ratio because from this ratio management knows that which inventory take more time to sold and which take less time.

If the average inventory period ratio is high it means that inventory takes more time to sell.

If the ratio is low then inventory takes less time to sold which is good for the company.

Financial Ratio is a forum where you will learn about all ratios definitions and formulas.

Updated: October 8, 2019 — 9:19 pm

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