![]() DIO = Number of days / Inventory turnover There is also another method to calculate days inventory outstanding by dividing the number of days by the ratio of inventory turnover. Number of days: This corresponds to the total number of days that comprise the period in question.Cost of sales : Refers to the total amount spent on inputs like materials, labor, and energy that went into making the finished goods that were sold within the time frame in question.Average inventory : Inventory valuations might be based on either the final value at the conclusion of the reporting period or the average value throughout the period.Days Inventory Outstanding = (Average inventory / cost of sales) x number of days The following formula is typically used to calculate DIO. You can use a certain formula to calculate DIO. The Formula and Calculation of Days Inventory Outstanding Comparisons of DIO between industries are pointless because the DIO varies so significantly depending on the industry. ![]() A low days inventory outstanding indicates that inventory is transformed to cash more rapidly, whereas a high DIO indicates that inventory liquidity is weak. Additionally, you may also utilize inventory software from HashMicro to help you track your inventory.ĭIO displays the inventory liquidity and also serves as a gauge of a business’s operational and financial effectiveness. DIO also has several other terms such as days sales of inventory or days in inventory. It gives an overview of the cost of retaining inventory as well as possible causes for the delay of inventory sales. How to Improve Days Inventory Outstanding?ĭays Inventory Outstanding (DIO) is a financial ratio that measures how long an organization typically keeps inventory before selling it to customers.The Formula and Calculation of Days Inventory Outstanding.
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