1. What is Aging Percentage?

Aging Percentage is a financial metric that measures the proportion of aged inventory relative to total inventory. It helps businesses identify slow-moving or obsolete stock that may require special attention or write-offs.

2. How Does the Calculator Work?

The calculator uses the Aging Percentage formula:

Where:

• \( Aged\ Inventory \) — Value of inventory that has exceeded its expected shelf life or turnover period (currency)
• \( Total\ Inventory \) — Total value of all inventory (currency)

Explanation: This formula calculates the percentage of inventory that is considered aged or slow-moving, providing insight into inventory management efficiency.

3. Importance of Aging Percentage Calculation

Details: Monitoring aging percentage is crucial for effective inventory management, cash flow optimization, and identifying potential obsolescence risks. High aging percentages may indicate poor inventory turnover or inadequate demand forecasting.

4. Using the Calculator

Tips: Enter aged inventory and total inventory values in currency units. Both values must be positive, and aged inventory cannot exceed total inventory. The result shows the aging percentage.

5. Frequently Asked Questions (FAQ)

Q1: What constitutes "aged inventory"?
A: Aged inventory typically refers to items that have been in stock beyond their normal turnover period, often 90 days or more, depending on industry standards.

Q2: What is a good aging percentage?
A: Ideal percentages vary by industry, but generally, lower is better. Most businesses aim for under 10-15% aged inventory.

Q3: How often should aging percentage be calculated?
A: Monthly calculation is recommended for most businesses to maintain effective inventory control and identify trends early.

Q4: What actions should be taken for high aging percentages?
A: Consider discounting, promotions, returns to suppliers, or write-offs to reduce aged inventory and free up working capital.

Q5: Does this calculation apply to all types of inventory?
A: Yes, but the definition of "aged" may vary by product type. Perishable goods have shorter aging periods than durable goods.