For example, if a company had an inventory turnover ratio of 9, the company's inventory turned over 9 times during the year. If we use 360 as the number of days in the year, the company had (on average) 40 days of inventory on hand during the year (360 days divided by the inventory turnover ratio of 9).
Since the inventory turnover ratio reflects the average amount of inventory during the year, and since sales usually fluctuate during the year, the days' sales in inventory is an approximation.
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