Accounting ratio
Inventory turnover (days)
On average, how many days goods stay in inventory before they are sold.
What the exam boards say
- Cambridge 0452 and 0985, 2027 to 2029: listed. Formula as printed: Average inventory / Cost of sales x 365 days.
- Cambridge, 2026 syllabus: not listed as a ratio in the 2026 syllabus.
- Pearson Edexcel 4AC1: not named in the specification.
- OxfordAQA 9215: not named in the specification.
Cambridge states that for 2027 to 2029 the printed formulas are the only ones accepted in candidate responses, so use the wording above for a Cambridge paper.
Sources: Cambridge IGCSE Accounting 0452: syllabus for 2027-2029 (Version 1), pages 18, 21; Cambridge IGCSE Accounting 0452: syllabus for examination in 2026 (Version 2, December 2025), page 19; Pearson Edexcel International GCSE in Accounting (4AC1) specification (FT Sept 2017) (Issue 1, October 2016), page 21; OxfordAQA International GCSE Accounting (9215) specification (FT Sept 2024) (Version 1.2), page 18. See all sources.
Worked example
(Average inventory RM5,000 ÷ cost of sales RM30,000) × 365 = about 61 days.
How to interpret it
A shorter period usually means goods sell quickly and less cash is tied up in stock. Compare with earlier years and with similar businesses, and watch for a period so short that the business risks running out.
Using it in analysis
Inventory days turns the idea of stock turning over into something easy to picture: how many days goods sit in the business before they are sold. It uses the same figures as the rate of inventory turnover, but divides the other way round and multiplies by 365. Many people find days easier to compare with credit periods.
Example: cost of sales is RM438,000, opening inventory RM35,000 and closing inventory RM45,000. Average inventory is RM40,000, so the figure is (40,000 ÷ 438,000) × 365, about 33 days. The next year cost of sales is almost unchanged at RM440,000 but average inventory has climbed to RM66,000, giving about 55 days. Sales are flat, so the extra stock is not serving extra demand. Cash is tied up on the shelves for three more weeks, storage and insurance cost more, and the risk of mark-downs rises.
Reading the figure well means asking why it moved. A shorter period usually means goods sell faster or buying is more careful, which releases cash. But a very short period can mean bare shelves and lost sales. A longer period can show weak demand, over-ordering or slow lines, although stocking up before a busy season is sensible. A bakery and a furniture shop will never have the same figure, so compare with earlier years and with similar businesses.
Put it beside receivables days and payables days. Add the days stock is held to the days customers take to pay, then subtract the days the business takes to pay suppliers. The result shows how long cash is locked into trading. If stock days and receivables days are both rising, cash is tied up at both ends and a liquidity problem may follow. A connected comment like this earns evaluation marks.
Common mistakes are dividing by revenue instead of cost of sales, which mixes goods at cost with goods at selling price. Another is using closing inventory when the question asks for the average. A third is giving a bare number with no unit, when the answer should be in days. A good answer states the change, offers a likely reason from the question, and suggests an action, such as reviewing order quantities or cutting slow lines.
The figure is an average over a year, so it hides seasonal swings. It also says nothing about profit on each item or whether the stock is the right stock. Treat it as a prompt for questions, not a verdict.
Limitations
It is an average, so it hides seasonal swings, and it says nothing about the profit earned on each item.
Related ratios
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