How are Inventory Days calculated?

RTC compares the Inventory balance in the Balance Sheet for the month, to the Materials balance in the Income Statement for the month. If the Inventory balance is equal to the month’s Materials, it calculates it as 30 days.

The amount of Inventory over the Material balance for that month is then compared to prior months Materials and calculated as a portion of days.

Example:

Inventory as at Jun 21 $1,300,000
Materials for Jun 21 $600,000 (30 days)
Inventory Balance $700,000 ($1,300,000-$600,000)
Materials for May 21 $550,000 (+30 days)
Inventory Balance $150,000 ($700,000-$550,000)
Materials Apr 21 $500,000 ($150,000/$500,000 x 30 days = +9 days)

Total Inventory days are 30 + 30 + 9 = 69