1. What is Days Inventory Outstanding?

Days Inventory Outstanding (DIO) is a financial ratio that measures the average number of days a company holds its inventory before selling it. It indicates inventory management efficiency and liquidity.

2. How Does the Calculator Work?

The calculator uses the DIO equation:

Where:

• \( Average\ Inventory \) — The average value of inventory during the period (currency)
• \( COGS \) — Cost of Goods Sold per day (currency/d)
• \( 365 \) — Number of days in a year

Explanation: The equation calculates how many days it takes for inventory to turn into sales.

3. Importance of DIO Calculation

Details: DIO helps assess inventory management efficiency. Lower DIO generally indicates better performance, though optimal levels vary by industry.

4. Using the Calculator

Tips: Enter average inventory in currency units and COGS in currency per day. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good DIO value?
A: It varies by industry. Generally, lower is better, but too low might indicate stockouts. Compare with industry averages.

Q2: How is average inventory calculated?
A: Typically (Beginning Inventory + Ending Inventory)/2 for the period.

Q3: What if COGS is annual?
A: Divide annual COGS by 365 to get daily COGS before using this calculator.

Q4: How does DIO differ from inventory turnover?
A: Inventory turnover shows how many times inventory is sold/replaced in a period, while DIO shows days needed to sell inventory.

Q5: Can DIO be negative?
A: No, both inputs (inventory and COGS) should be positive, making DIO always positive.