Days Inventory Outstanding (DIO)
Average number of days inventory is held before being sold
What is Days Inventory Outstanding (DIO)?
Days inventory outstanding is the average number of days a business holds stock before selling it. It shows how quickly inventory turns into sales.
Holding stock ties up cash and carries risks, so a lower number generally means leaner, more efficient inventory management.
How this KPI is measured
- Function
- Finance
- Sub-function
- Cash Flow Management
- Industry
- All Industries
- Type
- Lagging
- Impact
- Financial control
- Unit
- days
- Measurement frequency
- Monthly / Quarterly
- Formula
- (Average inventory / Cost of goods sold) × Number of days in period
How to calculate it
Divide average inventory by cost of goods sold, and multiply by the number of days in the period.
For example, if average inventory is 2,000,000 and annual cost of goods sold is 12,000,000, DIO is (2,000,000 / 12,000,000) x 365 = about 61 days.
Compare within the same industry, since perishables turn in days and specialist equipment in months.
Where it is used
Managing working capital
Release cash from stock.
Improving buying
Match stock to demand.
Feeding the cash cycle
Use in cash conversion cycle.
How to improve it
Tips and common mistakes
- Too low can mean stock-outs and lost sales.
- Use average, not year-end, inventory.
- Compare only within similar industries.
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