Days Inventory Outstanding (DIO)
Days Inventory Outstanding (DIO)
Average number of days inventory is held before sale. Computed as average inventory divided by daily COGS.
When to use: Use to gauge inventory-cycle speed. Rising DIO can signal slowing demand, supply-chain bloat, or obsolete stock; falling DIO signals tighter inventory management. Pair with Inventory Turnover (the same idea expressed as a turnover number rather than days).
Formula
Variables
| Symbol | Name | Description | Unit |
|---|---|---|---|
| DSI | Days Inventory Outstanding (DIO) | Average days to sell inventory | days |
| Inventory | Average Inventory | Representative average balance over the same period as the numerator | $ |
| COGS | Cost of Goods Sold | Annual cost of goods sold | $ |
Real-Life Examples
Example 1: Mid-Cap Retailer
Average inventory $200M, COGS $1,200M.
Given
Step-by-Step
~61 days of inventory on hand — about 6 inventory turns per year. Reasonable for general retail; slow for groceries (high turnover, low DIO), fast for furniture or jewelry.
Frequently Asked Questions
They're reciprocals scaled by 365. DIO = 365 / Turnover; Turnover = 365 / DIO. Use whichever frame is more intuitive — "60 days of inventory" or "6 turns per year."
Could mean weakening demand (inventory piling up), inventory-quality issues (obsolescence), or strategic stockpiling (preparing for supply disruptions). The trend matters; investigate the cause.