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See Also:

Balance sheet / liquidity ratios:

Net working capital
Current Ratio
Acid Test Ratio
Debt to Equity Ratio
Debt Ratio
Debt to total capitalization

Account Receivable Ratios:

Day sales outstanding
Accounts receivable turnover
Average Age of Accounts Receivable

Inventory Ratios:

Inventory turnover
Average Age of inventory
GMROI
Economic Order Quantity

Account Payable Ratios:

Account payable turnover
Average age of accounts payable

Income Statement Ratios:

Interest Coverage Ratio
Earnings Per Share - EPS
Dividends Per Share
Dividend Payout Ratio
Dividend Yield

Management Ratios:

Total Asset Turnover
Return on Equity
Return on Common Stock Equity

 

 

 

Average Age of Inventory

Average age of inventory is another way of looking at inventory turnover. This ratio takes inventory turnover ratio and divides it into 365 days. The formula for average age of inventory is:

Average age of inventory = 365 days / inventory turnover.

In the example in inventory turnover CVS had a fiscal year ended 12/31/06 inventory turnover of 4. The average age of inventory was:

Average age of inventory = 365 / 4

Average age of inventory = 91 days

For the fiscal 3rd quarter ended September 30, 2007 CVS had an inventory turnover of 8. The average age of inventory was:

Average age of inventory = 365 / 8

Average age of inventory =  46 days

In an analysis of CVS it can be seen that they have significantly increased the management of their inventory. So long as it did not result in lost sales from too low an inventory level or stock-outs, CVS inventory control improved.