1. What is Days Inventory Outstanding (DIO)?

Days Inventory Outstanding (DIO) is a financial ratio that measures the average number of days a company holds its inventory before selling it. It's an important metric for assessing inventory management efficiency.

2. How Does the Calculator Work?

The calculator uses the DIO formula:

Where:

• Average Inventory — The average value of inventory during the period
• Cost of Goods Sold — The total cost of goods sold during the period
• 365 — Number of days in a year

Explanation: The formula shows how many days it takes for inventory to turn into sales. A lower DIO typically indicates more efficient inventory management.

3. Importance of DIO Calculation

Details: DIO helps businesses understand their inventory turnover rate, optimize stock levels, improve cash flow, and compare performance against industry benchmarks.

4. Using the Calculator

Tips: Enter average inventory and cost of goods sold in dollars. Both values must be positive numbers. The calculator will compute how many days inventory is typically held before sale.

5. Frequently Asked Questions (FAQ)

Q1: What is a good DIO value?
A: Ideal DIO varies by industry. Generally, lower is better, but it should be balanced with having enough inventory to meet demand.

Q2: How does DIO differ from inventory turnover?
A: Inventory turnover shows how many times inventory is sold and replaced in a period, while DIO converts this to days for easier interpretation.

Q3: Should I use beginning and ending inventory?
A: For more accuracy, use average inventory calculated as (beginning inventory + ending inventory)/2.

Q4: What if my business is seasonal?
A: For seasonal businesses, consider calculating DIO for specific seasons or using more frequent inventory measurements.

Q5: How can I improve my DIO?
A: Strategies include better demand forecasting, supplier coordination, inventory management systems, and product mix optimization.