Days Inventory Outstanding

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Definition

Days Inventory Outstanding (DIO), also known as Days Sales of Inventory (DSI), is an efficiency metric used to measure the average number of days a company holds inventory before selling it.

This ratio is industry specific and should be used to compare competitors and over time. Companies that create large machinery (such as Airplane manufacturers) are likely to have a higher DIO than a small retailer.

A declining ratio over time can indicate that a company is able to sell inventory at a quicker pace. An increasing ratio, generally a bad sign, can indicate a company held on to its outstanding inventory for a longer rate than usual.

DIO plays a crucial component in the Cash Conversion Cycle (CCC), which is used to determine how long cash is tied up in working capital.

Formula

Days Inventory Outstanding Formula / Days in Inventory Formula

YCharts calculates this formula as 91.5 x (Avg. Inventory/COGS)

Note: Days in inventory is typically presented as a yearly calculation, because it is represented quarterly here the 91.5 multiplier is used instead of 365. (The yearly calculation is written as 365 x (Avg. Inventory / COGS).

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