Number of days within Activity Ratios use 365 days as a standard practice for duration. However, if the operating cycle is less than 365 days- would it be appropriate to substitue the new duration? i.e. if the operating cycle is 180 days THEN days of inventory on hand = 365/inventory turnover WOULD BE CHANGED TO days of inventory on hand = 180/inventory turnover Is this correct.
generally, you need to annualize these numbers for comparison purposes, so for example, if you are doing a quarterly ratio analysis, you would multiply the AR for the quarter by 4 if you are doing receivables turnover so that quarterly ratios can be compared to YE ratios. hope this helps.