Days inventory outstanding converts turnover into a number of days — how long, on average, stock sits before selling. Average inventory divided by COGS, times the days in the period.
The example
$80k inventory, $480k COGS.
| A | B | |
|---|---|---|
| 1 | Item | Value |
| 2 | Avg inventory | 80000 |
| 3 | COGS | 480000 → ~61 days |
The formula
The formula:
How it works
How it works:
average_inventory / COGSis the fraction of a year’s cost tied up in stock.- Multiply by 365 (or the days in your period) to express it as days.
- Equivalently,
365 / inventory_turnover— the two are inverses. - Lower DIO means stock sells faster and less cash is tied up — usually better.
Part of the cash conversion cycle: DIO plus days sales outstanding (receivables) minus days payable outstanding tells you how many days cash is locked in operations. Cutting DIO frees working capital — one reason retailers obsess over it.
Try it: interactive demo
Average inventory and COGS.
Variations
From turnover
The inverse:
Per SKU
One product:
Custom period
Quarterly:
Pitfalls & errors
Cost basis. Use inventory and COGS at cost, consistently.
Period days. Use 365 for annual, 90 for a quarter — match the COGS window.
Lower usually better. But too low can mean stockouts — balance against service level.
Practice workbook
Frequently asked questions
How do I calculate days inventory outstanding in Excel?
How does DIO relate to turnover?
Is lower DIO always better?
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