Business calculators

Days Inventory Outstanding Calculator

Find out the number of days inventory outstanding with this easy-to-use calculator. By understanding how many days of inventory are being held, businesses can make better decisions about production and storage. This tool will help optimize operations and reduce costs.

Understanding Days Inventory Outstanding (DIO)

What is days inventory outstanding (DIO)? 

Days inventory outstanding (DIO) is a financial metric measuring the average number of days a company holds its inventory before selling it. It’s calculated by dividing the average inventory by the cost of goods sold (COGS) per day. Used in conjunction with the inventory turnover ratio, the DIO can tell you a lot about a company’s cash flow. A low DIO suggests a company is selling through its inventory quickly. A higher DIO indicates a company is struggling to move its inventory. Companies that track this metric manage their inventory levels better by striking a careful balance between stocking enough products to meet customer demand without tying up too much capital in inventory.

What is the DIO formula? 

The DIO formula involves simple division and multiplication. It looks like this

DIO = (average inventory / COGS) * days in accounting period

The average inventory refers to the value of a business’s inventory on average throughout the accounting period. The COGS includes all the costs associated with producing and selling the business’s products, for example, the cost of raw materials. Finally, the days in the accounting period is typically one year or 365 days.

This moderately complex formula requires a bit of preliminary research and calculations. Let’s go over the steps, below. 

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Common DIO questions

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