Which metric represents the time required to convert inventory into sales?

• A. Days Inventory
• B. Days Payable
• C. Days Receivable
• D. Days Sales Outstanding

Answer: (A)

Inventory turnover and the inventory cycle determine how long inventory stays on hand before being sold. The metric Days Inventory expresses that timeframe—the average number of days items remain in stock before a sale occurs. It’s derived from how quickly you turn over inventory: if you divide 365 by your inventory turnover (typically COGS divided by average inventory), you get the average days inventory. A higher turnover means fewer days in stock, so faster conversion from inventory into sales; a lower turnover means the opposite.

This is why the metric in question is the best fit for the concept. Other metrics focus on cash flow after a sale rather than the period inventory sits before sale: Days Payable is about how long you take to pay suppliers, and Days Receivable (Days Sales Outstanding) measures how long it takes to collect cash after a sale. Those don’t describe the time it takes to convert inventory into sales. For a concrete feel, if COGS is 1,200,000 and average inventory is 600,000, turnover is 2, and Days Inventory is 365/2 = 182.5 days, meaning inventory on hand converts to sales over roughly six months.