This ratio indicates the waiting period of the investments in inventories and is measured in days, weeks or months. Inventory turnover and average age of inventories are inversely related. Average age of Inventories Ratio =
360 days Inventory Turnover
Year Days
2003-04 11.9
Average age of Inventories 2004-05 2005--06 2006-07 15.9
14.8
2007-08
18.2
22.4
Table 5. 12 Average age of Inventories Ratio Analysis
Figure 5. 12 Average age of Inventories Ratio Analysis Interpretation This graph shows that inventory convert into cash in short time period. Inventory turnover ratio is low in 2003-04 So In this year inventory is converted in cash 11.9 days. The inventory conversation in to cash time duration is increases from 2004 to every year so the management should tray to efficient inventory conversation,so it will It shows that company effectiveness utilizing its Inventories in quickly. 5.4.5 Debtor Turnover Ratio