1. What is the Days On Hand Formula?

The Days On Hand (DOH) formula calculates how many days' worth of inventory a company has on hand based on its average inventory and cost of goods sold per day. It's a key metric for inventory management efficiency.

2. How Does the Calculator Work?

The calculator uses the Days On Hand formula:

Where:

• \( DOH \) — Days On Hand (days)
• \( \text{Average Inventory} \) — Average inventory value ($)
• \( \text{COGS per Day} \) — Cost of Goods Sold per day ($/day)

Explanation: This formula measures inventory efficiency by showing how long current inventory levels would last based on daily sales costs.

3. Importance of DOH Calculation

Details: DOH helps businesses optimize inventory levels, reduce carrying costs, improve cash flow, and prevent stockouts or overstock situations.

4. Using the Calculator

Tips: Enter average inventory in dollars and COGS per day in dollars per day. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good DOH value?
A: Ideal DOH varies by industry, but generally lower values indicate better inventory turnover. Most businesses aim for 30-90 days depending on their industry.

Q2: How do I calculate COGS per day?
A: Divide total annual Cost of Goods Sold by 365 days. For example, if annual COGS is $365,000, COGS per day is $1,000.

Q3: What is considered average inventory?
A: Average inventory is typically calculated as (Beginning Inventory + Ending Inventory) ÷ 2 for a specific period.

Q4: Why is DOH important for businesses?
A: DOH helps identify inventory management issues, optimize working capital, and improve overall operational efficiency.

Q5: Can DOH be too low?
A: Yes, very low DOH may indicate risk of stockouts and lost sales. Balance is key between inventory costs and service levels.