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Inventory Conversion Period

The inventory conversion period is the time required to obtain materials for a product, manufacture it, and sell it. Though the inventory conversion period is treated as an average amount for all of the items that a company manufactures, it is most useful when calculated on an individual product basis, since you can then discern which products require the longest period to construct and convert to cash - which can result in process analysis to compress these time periods, thereby reducing the company cash investment in inventory.

The inventory conversion period is essentially the time period during which a company must invest cash while it converts materials into a sale.To find out the value of inventory conversion period we should have the value of average inventory and cost of sales.

365 i

Here I=Inventory Turnover Ratio

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