Question

What is the inventory conversion period? How is it calculated?

Answer 1

The inventory conversion period is the time taken to sell the inventory. A shorter inventory conversion period indicates more efficiency in the management of inventory. It is computed as follows:

Inventory conversion period (in days) = `"Number of days in a year"/"Inventory turnover ratio"`

Inventory conversion period (in months) = `"Number of months in a year"/"Inventory turnover ratio"`