A financial health indicator that measures the number of days inventory is held before it is sold to a customer. This ratio is calculated by dividing the number of days in a fiscal year by the inventory turnover ratio. The longer a company to hold on to its inventory, the longer it is incurring carrying costs, shrinkage, and obsolescence. Money tied up in inventory cannot be used for other purposes, reductions in inventory are a source of cash because the money was spent in the past. Classified as an activity ratio.