Inventory Days Calculator
Calculate Days Inventory Outstanding (DIO) and inventory turnover ratio from average inventory value and cost of goods sold.
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DIO = (Average Inventory / COGS) × 365
Results
Days Inventory Outstanding
45.6 days
Inventory Turnover Ratio
8.00x / year
How Does the Inventory Days Calculator Work?
Days Inventory Outstanding (DIO) measures the average number of days a company holds inventory before selling it. Enter your average inventory value (typically the average of beginning and ending inventory for the period) and your annual cost of goods sold (COGS). The calculator divides average inventory by COGS and multiplies by 365 days to get DIO, and also shows the inventory turnover ratio — how many times inventory is sold and replaced over the year.
Example
A company with $50,000 in average inventory and $400,000 in annual COGS has a DIO of (50,000 / 400,000) × 365 ≈ 45.6 days — meaning inventory sits for about 45-46 days on average before being sold. That corresponds to an inventory turnover ratio of 8x per year.
Common Use Cases
- Assessing how efficiently a business manages its inventory compared to industry peers.
- Spotting a slowdown in sales velocity before it shows up elsewhere in the financials.
- Evaluating a company as part of the cash conversion cycle alongside receivables and payables days.
- Comparing DIO trends quarter over quarter to catch a build-up of unsold stock.
FAQs
Is a lower or higher DIO better?
Generally, a lower DIO is better — it means inventory converts to sales faster, tying up less cash. However, an extremely low DIO can also signal understocking and lost sales from stockouts, so it's best interpreted against industry norms and the company's own history.
How is DIO related to inventory turnover?
They're inverses of the same idea expressed on different scales: turnover ratio = COGS ÷ average inventory (times per year), while DIO = 365 ÷ turnover ratio (days per cycle). A turnover of 8x per year corresponds to a DIO of about 45.6 days.
Why use average inventory instead of ending inventory?
Average inventory (typically beginning plus ending balance divided by two) smooths out seasonal swings and point-in-time snapshots, giving a more representative figure for the period than a single ending balance that might be unusually high or low.