Average days to sell the inventory (or inventory turnover period) is calculated by dividing the number of days in the reporting period by the inventory turnover ratio.
$$Average\; days\; to\; sell\; the\; inventory \mmlToken{mo}[linebreak="auto"]{=} \frac{365\; days}{Inventory\; turnover\; ratio}$$
A shorter average days to sell the inventory is advantageous for three reasons:
- It reduces unit costs by minimizing expenses such as rent, insurance, and utilities.
- It has a positive impact on profitability as less capital is tied up in inventory.
- It prevents seasonal, perishable, or time-sensitive goods from sitting idle in warehouses.