This days sales in inventory template will show you how to find average number of days or time required for a business to convert its inventory into sales.
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Days Sales in Inventory (DSI), sometimes known as inventory days or days in inventory, is a measurement of the average number of days or time required for a business to convert its inventory into sales. The days sales in inventory value is calculated by dividing the inventory balance (including work-in-progress) by the amount of cost of goods sold. This number is then multiplied by the number of days in a year, quarter, or month.
To determine how many days it would take to turn company’s inventory into sales, the following formula is used:
DSI = (Inventory / Cost of Sales) x (# of Days in the Period)
Low days sales in inventory reflects fast sales of inventory stocks and therefore would minimize handling costs as well as increase in cash flow. High days sales in inventory value generally indicates either a slow sales performance or an excess of purchased inventory (the company is buying too much inventory), which may eventually become obsolete.
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