Wholesale and Distribution

Opportunity Cost

What is Opportunity Cost?

Opportunity cost refers to the profit or amount of money lost when one option/alternative is chosen over another.
This should be based on your company’s own cost of capital standards.

How Do You Calculate The Opportunity Cost?

To calculate the amount of your opportunity cost, simply get the cost of capital on a time period then multiply it by the average net value of inventory on the same time period.

Opportunity Cost = Cost of Capital x Average Net Value of Inventory

Wholesale and Distribution

Inventory Days of Supply

What is the Inventory Days of Supply?

The Inventory Days of Supply refers to the average number of days it takes for a product-selling company to sell its finished goods. Finished goods inventory on hand to cover a number of days of projected usage.

How to Compute the Inventory Days of Supply?

To know your inventory days of supply, simply divide the total annual cost of goods sold (COGS) by 365 then divide it by the on hand finished goods inventory value.

Inventory Days of Supply = On-Hand Finished Goods Inventory Value / (Total Annual COGS/365)

Wholesale and Distribution

Average Days to Sell Inventory

What is Average Days to Sell Inventory?

This financial ratio indicates the average time in days that a company takes to turn its inventory into sales.

How to Calculate The Average Days to Sell Inventory?

To calculate the average days to sell inventory, simply divide the ending inventory by the cost of goods sold by the same time period. Multiply the result by 365.

Days to Sell Inventory = (Ending Inventory / Cost of Goods Sold for the Period) x 365