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Ratios: Average Days in Inventory definitions Flashcards

Ratios: Average Days in Inventory definitions
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  • Average Days in Inventory
    Represents the typical number of days a unit remains in stock before being sold, reflecting how efficiently inventory is managed.
  • Efficiency Ratio
    A metric used to assess how effectively a company utilizes its resources, such as inventory, to generate sales.
  • Inventory Turnover Ratio
    Shows how many times inventory is sold and replaced during a period, calculated as cost of goods sold divided by average inventory.
  • Cost of Goods Sold
    Total direct costs attributable to the production of goods sold by a company during a specific period.
  • Average Inventory
    The mean value of inventory held, found by adding beginning and ending inventory balances and dividing by two.
  • Beginning Inventory
    The value of inventory a company has at the start of an accounting period, used in calculating average inventory.
  • Ending Inventory
    The value of inventory remaining at the end of an accounting period, essential for average inventory calculations.
  • Benchmarking
    The process of comparing a company's performance metrics, like days in inventory, to industry standards or competitors.
  • Industry Standards
    Commonly accepted performance metrics within a specific sector, used as reference points for comparison.
  • Warehouse Duration Costs
    Expenses incurred from storing inventory, including rent and utilities, which increase with longer storage times.
  • Numerator
    The top part of a fraction in ratio calculations, such as cost of goods sold in the inventory turnover ratio.
  • Denominator
    The bottom part of a fraction in ratio calculations, such as average inventory in the inventory turnover ratio.
  • Reciprocal Relationship
    A connection where one value increases as the other decreases, as seen between inventory turnover and days in inventory.
  • Net Sales
    Total revenue from sales after deducting returns, allowances, and discounts, sometimes provided but not used in inventory turnover calculations.