This Days Inventory Outstanding Template will show you how to arrive at the number of days inventory outstanding using the formula: Average Annual Inventory / Cost of Sales x # of Days in Period.
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What is Days Inventory Outstanding (DIO)?
Days inventory outstanding (DIO) is the average number of days that a company holds its inventory before selling it. The days inventory outstanding calculation shows how quickly a company can turn inventory into cash and is used to determine the liquidity of the company’s inventory. Days inventory outstanding is also known as “inventory days of supply,” “days in inventory,” or “the inventory period.”
Days Inventory Outstanding Formula
The formula for days inventory outstanding is as follows:
Days Inventory Outstanding = (Average inventory / Cost of sales) x Number of days in period
Average inventory = (Beginning inventory + Ending inventory) / 2