1. What is Months of Inventory (MOI)?

Months of Inventory (MOI) is a financial metric that measures how many months it would take to sell through the current inventory based on the current cost of goods sold rate. It helps businesses manage inventory levels and optimize working capital.

2. How Does the Calculator Work?

The calculator uses the MOI formula:

Where:

• \( Inventory\ Value \) — Total value of inventory in currency
• \( COGS \) — Cost of Goods Sold per year in currency
• \( 12 \) — Number of months in a year

Explanation: The formula converts annual COGS to monthly COGS and then divides the inventory value by the monthly COGS to determine how many months the current inventory would last.

3. Importance of MOI Calculation

Details: MOI is crucial for inventory management, cash flow planning, and identifying potential overstocking or understocking issues. It helps businesses maintain optimal inventory levels to meet demand without tying up excessive capital.

4. Using the Calculator

Tips: Enter inventory value in currency units, COGS in currency per year. Both values must be positive numbers. The calculator will compute the months of inventory based on your inputs.

5. Frequently Asked Questions (FAQ)

Q1: What is a good MOI value?
A: Ideal MOI varies by industry, but generally 1-3 months is considered healthy. Higher values may indicate overstocking, while lower values may risk stockouts.

Q2: How does MOI differ from inventory turnover?
A: MOI shows how long inventory will last, while inventory turnover shows how many times inventory is sold and replaced in a period. They are inversely related.

Q3: Should I use COGS or sales for MOI calculation?
A: Use COGS as it reflects the actual cost of inventory sold, providing a more accurate measure of inventory duration.

Q4: How often should MOI be calculated?
A: Monthly calculation is recommended to track inventory efficiency trends and make timely adjustments to purchasing and production.

Q5: What factors can affect MOI?
A: Seasonality, demand fluctuations, supply chain disruptions, and changes in purchasing patterns can all impact MOI calculations.