What is days inventory outstanding?
Days inventory outstanding (DIO), also known as days sales of inventory, is the average number of days a company holds stock before selling it. It is one of the three parts of the cash conversion cycle and shows how long cash stays locked up in goods.
Formula
DIO = average inventory ÷ cost of goods sold × days in the period
Worked example
Average inventory of 85,000.00 against cost of goods sold of 620,000.00 over 365 days gives a DIO of 50 days. The stock turns over 7.29× in the period.
How to use the days inventory outstanding calculator
- Enter your figures: average inventory, cost of goods sold and days in the period.
- Read the result. It updates as you type, so there is no button to press.
- Try other numbers to compare scenarios. Reset brings back the example values.
Getting it right
- Lower is generally better, because cash is released sooner, as long as you are not running short of stock.
- Use 365 for a full year, 90 for a quarter or 30 for a month, matched to the period your cost of goods sold covers.
- Watch the trend. A DIO that climbs from one period to the next is an early sign of slowing sales or over-buying.
Frequently asked questions
What is the formula for days inventory outstanding?
DIO equals average inventory divided by cost of goods sold, multiplied by the number of days in the period. For a year, multiply by 365.
What is a good DIO?
It depends on the industry. Grocers may be under 30 days, general retailers 60 to 90, and manufacturers of large equipment well over 100. Compare against your own history and direct competitors.
How is DIO related to inventory turnover?
They are inverses. DIO equals the days in the period divided by the turnover ratio, so a turnover of 7.3 a year is a DIO of 50 days.